Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

DUNDEE EXTENSION ORDER CONFIRMATION BILL

Mr. Secretary Campbell presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to Dundee Extension: And the same was read the First time; and ordered to be considered upon Tuesday next and to be printed. [Bill 176.]

Oral Answers to Questions — SCOTLAND

North Sea Oil

Mr. Douglas: asked the Secretary of State for Scotland if he will request his Economic and Industrial Division to evaluate the total possible job gains to Scotland from the exploration, production and servicing of North Sea oil, in the light of the latest discoveries.

Mr. Strang: asked the Secretary of State for Scotland if he will commission a report from an independent team of experts on the potential number of jobs which could be created in Scotland during the next five years through the exploitation of North Sea oil.

The Secretary of State for Scotland (Mr. Gordon Campbell): Such an evaluation could only be very approximate and would soon be out of date, since new discoveries are likely to continue and new schemes are likely to be formulated by those whose exploration proves successful. The important task is to enable the maximum of new jobs to be created

in Scotland without delays, for example, by legislation to allow oil rig servicing at Peterhead.

Mr. Douglas: Does not the Secretary of State consider it remarkable that the latest issue of the Scottish Economic Bulletin does not mention North Sea oil? Does this not substantiate to a large degree the criticism made by Sir William McEwan Younger that the Government are not following up this exploitation in the manner in which they should?

Mr. Campbell: As hon. Members will know from my reply to a Question on 4th July, I have caused to be placed in the Library the first two editions of the periodic information sheet on North Sea oil.

Mr. Strang: Is the Secretary of State aware that only yesterday at a meeting in the House the Manager of the BP Forties field was lamenting the fact that even now so few British firms are coming forward to tender for important contracts in this field? These contracts go to not only the Americans but to French, Dutch and Italian firms. Their offshore industries have a better record of Government help. Will the Government look at the way in which they can get involved with Scottish industry and British industry as a whole to develop expertise for this offshore industry?

Mr. Campbell: I have been broadcasting information and drawing attention to all the opportunities for Scottish industry for many months. I was also interested in the announcement by BP that it thought that as many as 40,000 jobs might be created by its plans. I understand that included in this figure was a multiplier of five—that is to say, about one-sixth of the jobs were directly related to BP's plans and the others were indirectly related.

Mr. Sproat: Would my right hon. Friend agree that it is much more important now to get on with practical measures, such as the provisions for Peterhead harbour and the loan and grant for Aberdeen harbour, improvement of infrastructure and the speeding-up of planning procedures, so that Scotland can take the maximum advantage from North Sea oil?

Mr. Campbell: I agree entirely with my hon. Friend. I know that those concerned with North Sea oil exploration expect to meet stormy weather in the North Sea, but I doubt whether they expected to meet the heavy weather that the Bill concerning Peterhead harbour has been meeting in the Scottish Committee.

Mr. Baxter: Has the Secretary of State or any Government Department given consideration to the utilisation of resources such as the natural oil of the North Sea for not only the present generation but future generations, or are we only greedy people looking for our own immediate advantage without planning for the future needs of the people of Scotland?

Mr. Campbell: It is reckoned that oil which is likely to be found below the North Sea, besides that which has already been found, will be available for many years to come. I believe that it is in the Scottish interest that we should encourage the production of oil from these fields as soon as we can.

Mr. Douglas: In Scotland.

Mr. Ross: Bearing in mind that the Bill to which the right hon. Gentleman has referred was completed in less than two sittings and that the Lord Advocate and the Minister in charge thanked us for valuable contributions to it, it is rather surprising that the right hon. Gentleman takes this attitude. Will he say what he or his officers are doing to meet some of the complaints made by my hon. Friend the Member for Edinburgh, East (Mr. Strang) about contact directly with Scottish industries? Surely the Minister of State is the man who should certainly have some influence in this respect.

Mr. Campbell: The Ministers of both the Scottish Office and the Department of Trade and Industry are in touch with those concerned, not only industry, but commerce, and authorities such as NESDA and local authorities which are very much concerned with the protection of amenity as well as with the development of this new industry.

Mr. William Hamilton: asked the Secretary of State for Scotland what meetings he has arranged to attend over the next six months to discuss the oppor-

tunities presented by the North Sea oil discoveries off Scottish shores.

Mr. Gordon Campbell: I am continually discussing these matters with groups and individuals from the bodies and industries concerned, while keeping in close touch with my right hon. Friend the Secretary of State for Trade and Industry.

Mr. Hamilton: Will the Secretary of State tell us whether he intends to have an urgent meeting with Sir William McEwan Younger in view of the fact that he, as Chairman of the Tory Party in Scotland, has advocated nationalisation of this organisation? If he will not do that, will the right hon. Gentleman at least give an assurance that he will make inquiries to see that no civil servant in his Department has any very close personal relationship with any of the oil companies concerned?

Mr. Campbell: I do not wish to comment on the hon. Member's last remark except to say that it is the dutyof my Regional Development Division to be in the closest touch with the companies involved in this business. The staff of the division have received a tribute from many of the companies for the way they are the contact men with the Government on every kind of problem that arises. I would hope that the hon. Member will appreciate the things that have been done already. Platform building is taking place in at least three places, and the biggest platform in the world is about to be started this month at Nigg Bay. Servicing facilities are available, particularly at Peterhead, and the pipeline to Grange-mouth is now being planned with expansion at Grangemouth.

Mr. Wolrige-Gordon: Is my right hon. Friend aware that while nationalisation is always unintelligent, it would be particularly unintelligent at this stage of oil development in the North Sea?

Mr. Campbell: It would be bound to hold up everything rather than accelerate development. The previous Government, like us, operated on the basis of allocating blocks, going as fast as investment and technology can proceed.

Mr. Donald Stewart: While Scotland may become the Texas of Europe for the extraction of oil, there seems very little prospect that it will become the Texas of


Europe when it comes to profits. An increasing number of people in Scotland are determined that on this issue the cake shall not be cut in the customary manner of British Governments—that is, with the profits going to England and the pollution to Scotland.

Mr. Campbell: Except for the refineries this is not a polluting industry. It is a clean industry and most of the operations so far started are non-polluting. I disagree entirely with what the hon. Member has said. The royalties from oil cannot begin for another two years because that is when the first oil will start to flow from Scottish waters. As for Government help, there has been 100 per cent. loan of over £1 million to part of Aberdeen Harbour, a 60 per cent. grant towards the fishing harbour at Peterhead and another £1 million of work Accelerated improvements have been announced for roads in the North-East and there is a great deal more being done which I shall not catalogue now.

Mr. Ross: Sir William McEwan Younger made substantial criticisms. Has Sir William asked for a meeting with the Secretary of State or has the Secretary of State asked for a meeting with Sir William to discuss these matters?

Mr. Campbell: I have seen Sir William twice since he made his speech. Our meetings are routine. I see him from time to time anyway.

Mr. Ronald King Murray: asked the Secretary of State for Scotland if he will make a statement upon arrangements for long-term economic planning in regard to the impact of North Sea oil upon the Scottish economy.

Mr. Gordon Campbell: The Scottish Economic Council and Planning Board provide appropriate machinery together with the Scottish Standing Conference on North Sea Oil. In addition the Government study into opportunities for industry over the period to 1985 is being carried out.

Mr. Murray: Will the Secretary of State consult his ministerial colleagues and the oil industry on the possibility of setting up a North Sea oil development authority to co-ordinate all aspects of the development of North Sea oil? If such an idea finds favour, will he insist that

the authority be sited in Scotland and consider the powerful claim of Leith, sited as it is at the centre of the development, to house such an authority?

Mr. Campbell: I am certainly ready to consider additions and improvements to the existing machinery. There is a planning conference and there are planning authorities already in the field. If they are to go into the planning they will need to be given statutory powers by Parliament. There is great concern among the planning authorities about protecting amenity and also about the fishing industry. None the less, there is no doubt that the oil in the North Sea can create a new and flourishing industry, with ancillary services and many new jobs for Scotland.

Sir J. Gilmour: Does my right hon. Friend agree that oil from the next development off the Scottish coast is likely to come ashore by sea rather than by pipeline? Is he aware of the anxiety in Scotland about whether the oil is to be landed in Scotland or elsewhere?

Mr. Campbell: I amwell aware of the interest, but only two companies have announced their plans. Other companies still have to make up their minds.

Mr. Grimond: The Secretary of State will of course appreciate that such headquarters should be sited either in Orkney or Shetland. While I do not under-estimate the excellent work done by the Scottish Office, the discovery of oil raises entirely new problems. Will the Secretary of State therefore keep in touch with Norway and other countries which are facing these new problems and have some experience on how they are best handled?

Mr. Campbell: We are watching what is done in other countries. The policy we have been following is to try to speed the exploration and then the production of oil as fast as investment and technology will allow. Other countries have not necessarily been following the same policy. I believe that our policy is right for Scotland. If we had gone more slowly we probably should not know today of the discoveries opposite the Scottish shores.

Mr. Ross: One trouble surely is that ministerial responsibility rests not with


the Secretary of State for Scotland but with the Secretary of State for Trade and Industry under the Continental Shelf Act and the Petroleum Acts going back to about 1924. Is the right hon. Gentleman satisfied that there is sufficiently close co-ordination between himself and his right hon. Friend? If he is, bearing in mind that the full potential has not yet been realised and its immense importance to Scotland, will not he and the Government consider producing a White Paper giving as much information as possible on the planning aspects and the future?

Mr. Campbell: I think I made it plain in my earlier replies at the cost of some repetition that my right hon. Friend the Secretary of State for Trade and Industry is primarily responsible for the oil industry and also that we work very closely together. Of course I will consider producing more information, but the situation is continually changing. What can be said today is very different from what could have been said six months ago because of developments even since then. As I said earlier, I have arranged to have placed in the Library from time to time for the benefit of hon. Members bulletins containing information about North Sea developments. That may be the best way of dealing with this because the situation is continually changing as more information becomes available.

Government Policy (STUC Representations)

Mr. Sillars: asked the Secretary of State for Scotland what recent representations he has received from the Scottish Trades Union Congress about Government policy in Scotland; and what replies he has sent.

Mr. Gordon Campbell: I received for comment a number of resolutions passed at the recent annual congress and I have taken careful note of all these. On matters entirely within my responsibility I have sent replies explaining the Government's policies. After consultation with me, my right hon. Friend the Minister for Industrial Development has given a comprehensive reply on behalf of the Government to the composite resolution on the Scottish economy which was sent to a number of Ministers including my right hon. Friend the Prime Minister.

Mr. Sillars: The Secretary of State is aware that developments are moving very swiftly in Scottish TUC opinion. Is he aware of the meeting which took place in. Lanarkshire yesterday and of the view taken there that it is absolutely essential to obtain a very high output target for the BSC as a prerequisite for the Hunterston development project? If the right hon. Gentleman knows that we shall not get either of these two objectives, will he now resign from office and, using his intimate knowledge of this particular situation, come out of Government and lead the Scottish campaign for these desirable objectives?

Mr. Campbell: I have led successful Scottish campaigns in the past, when I have not had other duties to perform. [HON. MEMBERS: "Such as?"] I have led successful campaigns, including one for the severely disabled. I am aware of the anxiety in Lanarkshire and Mother-well about this matter, but people there are also anxious about the effects of a major steelworks upon their area because it would greatly reduce the number of people employed in relation to unit output and it might well have other effects upon their area. Therefore, this is a much more complicated subject than the hon. Gentleman makes out.

Mr. Bruce-Gardyne: In the representations which my right hon. Friend has received from the Scottish Trades Union Congress, has there been any indication on the part of that body of a desire to purge the unfortunately rather too well justified reputation of the trade union movement in West Central Scotland for mindless militancy, a reputation both at home and abroad which is a major obstacle to the attraction of incoming industry?

Mr. Campbell: Like my hon. Friend, I deplore mindless militancy where it is to be found, but I should say that the Scottish Trades Union Congress and its officials have themselves always been against it and I would not accuse them of it.

Mr. Grimond: Has the Secretary of State yet found time to study the latest remarks of Sir William McEwan Younger on the subject of steel? Will he look at the suggestion for having a separate Scottish Steel Corporation, as economies of


scale have now reached their maximum and it is undesirable that everything should be run from London? Will the right hon. Gentleman use his influence with the Scottish Unionist Party to have Sir William's speeches published in a book?

Mr. Campbell: That isa matter for Sir William. As the right hon. Gentleman knows, I have with me the text of one of his speeches, as I had the one on oil three weeks ago. It is much better that people should read what Sir William actually said as opposed to some of the over-simplified reports which appear in the Press. It is really a matter for Sir William himself.

Housing Associations (Cost Rent Houses)

Mr. Ewing: asked the Secretary of State for Scotland, how many houses administered by cost rent housing associations in Scotland were unoccupied at 30th June, 1972.

The Under-Secretary of State for Development, Scottish Office (Mr. George Younger): I do not have this information which should be available from the housing associations concerned.

Mr. Ewing: These housing associations have some responsibility to the Scottish Office. Is the hon. Gentleman aware that they have never been a success and that in my constituency a number of such cost rent houses, high amenity houses, are standing empty? Would it not be better either to put the houses up for sale or, the better alternative, transfer them to the control of the local authorities and have them allocated to families in need?

Mr. Younger: I know of the cases in the hon. Gentleman's constituency; he has mentioned them before. These houses were built under the scheme introduced in the early 1960s, with an Exchequer loan but no other form of Government subsidy. It is for the housing associations to manage their own affairs as they see fit according to the existing circumstances. Under the new legislation the introduction of rent allowances may help some of the tenants.

Planning Procedures

Mr. Eadie: asked the Secretary of State for Scotland if he will make a

statement on amendments to planning procedures which entail the expediting of land to be made available for building projects.

Mr. Younger: My right hon. Friend asked local planning authorities in March this year to give priority to applications for planning permission for new industrial building projects of 15,000 sq. ft. or more. He reminded them also of the need to deal promptly with planning applications generally. He is now consulting the local authority associations about other ways of expediting planning procedures.

Mr. Eadie: Before showing concern about expediting planning procedures, ought not the Minister to examine existing planning procedures to prevent pollution in our villages and their surrounding area? Is he aware, for example, that in a village in my constituency people are being smothered by pollution because the present planning laws have proved inadequate to protect them?

Mr. Younger: If the hon. Gentleman will write to me about particular cases, I shall be glad to look into them and do what I can to help. Decisions of this sort are first and foremost the responsibility of the local planning authorities, but I shall always be most ready to help them and to help the hon. Gentleman in any particular cases.

Rabbit Clearance

Mr. Brewis: asked the Secretary of State for Scotland how many rabbit clearance societies have ceased to operate since the grant was withdrawn.

The Under-Secretary of State for Home Affairs and Agriculture, Scottish Office (Mr. Alick Buchanan-Smith): Forty-four.

Mr. Brewis: Has my hon. Friend had reports of greatly increased numbers of rabbits in various parts of Scotland this year? Does he think that, from the standpoint of agricultural production, the withdrawal of the grant has been a worthwhile economy?

Mr. Buchanan-Smith: I am aware that there have been reports of rabbits being on the increase in certain parts of Scotland, but there has not been any significant increase in the number of complaints of agricultural damage reported.

Mr. David Steel: Does the hon. Gentleman realise that these niggardly savings are shifting the balance of Nature in the countryside? Not only are rabbits on the increase but, as the hon. Gentleman knows from my correspondence, bee-keeping is likely to be on the decrease thanks to the savings the Government are trying to make on the bee-keeping advisory service.

Mr. Buchanan-Smith: If the hon. Gentleman calls a saving of £70,000 a year niggling, his idea of what is niggling is different from mine. In any case, the prevention of the spread of rabbits is primarily in the interest of fanners themselves and it is to their benefit to see that it is done. As regards bee-keeping, I have written to the hon. Gentleman and I do not believe that bee-keepers have much to complain about.

Mr. Maclennan: Will the Minister issue a directive to the Highlands and Islands Development Board to encourage it to make grants for the re-establishment of these societies, at least in the area which the board covers, since this might help to offset the bad publicity which has been given to its attempts to control pests through giving aid to fox-hunting societies?

Mr. Buchanan-Smith: What the board does in regard to fox-hunting is its concern. I must return to the point which I made in reply to the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) that rabbit clearance is in farmers' own interests and to their benefit, and I do not believe that it is our function to support them in doing something which is to their benefit.

Fife and Dunfermline Hospital Boards

Mr. Gourlay: asked the Secretary of State for Scotland if, in view of the disclosures during the recent trial in the High Court, Edinburgh, of apparent irregularities, he will consider instituting a public inquiry into the administrative procedures of the East Fife hospital board of management, and also the use of hospital facilities for the private patients of consultants.

Mr. Adam Hunter: asked the Secretary of State for Scotaland if, in view of the public concern arising from recent

events, he will consider instituting a public inquiry into the administrative procedures of the Dunfermline and West Fife hospital board of management, and into the use of hospital facilities for the private patients of consultants.

The Under-Secretary of State for Health and Education, Scottish Office (Mr. Hector Monro): My right hon. Friend will await the report of the inquiry being undertaken by the South-Eastern Regional Hospital Board which has already been announced before deciding whether any further inquiry is necessary.

Mr. Gourlay: Does the hon. Gentleman realise that this initial operation is a purely whitewashing exercise and is not acceptable? In view of the disclosure of apparent irregularities, implicating a member of the board of management and other consultants, during the trial in Edinburgh, only a public inquiry to ascertain the facts will allay the great public concern on this matter. Further, will the investigation go into the free use of hospital facilities for the private patients of consultants? Will the hon. Gentleman be more explicit on that point?

Mr. Monro: The form of the inquiry was given careful consideration and in all the circumstances it was decided that in the first instance it should be by the regional hospital board. The answer to the second part of the hon. Gentleman's question is "Yes", it will look into the relationship of private practice and the hospital.

Mr. Hunter: Does the hon. Gentleman realise that recent Press reports of the trial in Edinburgh have caused great disquiet among people interested in the health service in my area? Will he obtain a copy of the transcript of the court proceedings and, after careful study, judge for himself whether a probe is necessary—preferably a public inquiry?

Mr. Monro: I appreciate the hon. Member's concern. That is why we have set up an inquiry. We decided right away to do so during the trial, though not before a decision was reached. The person concerned has appealed against the conviction and this will cause some delay


in the inquiry, but no more than we can possibly prevent.

Machine Tools (Educational Purchases)

Mr. Bruce-Gardyne: asked the Secretary of State for Scotland what is his latest estimate of the cost per item of purchases of machine tools by educational institutions in Scotland under the Department of Trade and Industry-financed scheme so far approved by and submitted for approval to his Department.

Mr. Monro: At 11th July, 1972, the average cost per item of the 197 items of equipment so far applied for was about £2,850. The average cost of the 150 items so far approved was about £2,540.

Mr. Bruce-Gardyne: Do not those figures suggest that educational institutions are still using the scheme for the purchase of little more than glorified "do-it-yourself" gadgets? Now that an extra £6 million of the taxpayer's money has been allocated, could not my hon. Friend use his influence to impress upon institutions under his ægis the need to use this scheme for the purchase of sophisticated modern machine tools of genuine industrial application, preferably manufactured in Scotland?

Mr. Monro: I think I can accept all my hon. Friend says, and I think that the publicity raised by his Question may encourage more local authorities to apply. The date was initially 30th June, but we are prepared to take further applications. I accept also that larger and more sophisticated machine tools could well be considered if they are in the educational interest of the colleges.

Mr. Buchan: Is the Minister aware that the real question is not just the unit cost but whether the Scottish machine tool industry will survive at all? Will he encourage his colleagues in the Government to give a quick reply on the attempt to intervene to save the Wickman Lang factory in Johnstone, which represents about 20 per cent. of the entire Scottish machine tool industry? Will he consider action along the lines suggested by his hon. Friend for the use of more sophisticated material in education establishments under his control and in training establishments?

Mr. Monro: I appreciate the hon. Member's concern on his constituency point and I hope that education authorities will apply for more machine tools. Money is still available from the grant that was set aside, and perhaps following our exchange of questions today more applications will come in. They will be considered by Her Majesty's inspectors as soon as they arrive.

North-East Scotland (Economic Potential)

Mr. Robert Hughes: asked the Secretary of State for Scotland if he will now commission an up-to-date review of the economic potential of the North-East of Scotland.

Mr. Gordon Campbell: The Gaskin Report has provided a basic review. What is now still to be added is the extent of the resources below the sea bed many miles from the coast. This will become more fully known as exploration proceeds and is extended to new blocks.

Mr. Hughes: Does the Secretary of State recollect that the Gaskin Committee Report, published only three years ago, made no mention of oil as an industry likely to help the growth potential of the North-East? Is he aware that there is widespread concern in North-East Scotland that the benefits to the area will be transient unless positive objectives are made by him and his Government? Is he prepared to bring up to date as urgently as possible the Gaskin Committee Report on the economic potential of the North-East?

Mr. Campbell: The fact that there was no mention of oil in the report illustrates how recent the developments have been. The situation concerning oil discoveries, however, is continually changing, as I have indicated. I agree with the hon. Member that we in Scotland, and particularly Scottish industry, need to concentrate on the opportunities and I repeat that Scotland can become the Texas of Europe.

Mr. Wolrige-Gordon: Is my right hon. Friend aware that it is a considerable relief to us that the Gaskin Report has been stood on its head in this respect, and as action is better than words will he be careful about instituting another such operation?

Mr. Campbell: I am satisfied that with the machinery we have—NESDA, the North East Joint Planning Advisory Committee, the North Sea Oil Standing Conference, which my hon. Friend the Under-Secretary of State for Development chairs, and the Gaskin Report—together with the information which is continually coming in about oil resources, we can operate as my hon. Friend would wish.

Police (Establishment)

Mr. Dempsey: asked the Secretary of State for Scotland if he will take steps to achieve an increase in police force establishments for the purpose of providing additional constables to be used exclusively for beat patrol duties, with a view to combating violence, vandalism and other similar acts against people and property; and if he will make a statement.

Mr. Buchanan-Smith: In the review of police establishments, which the Government put in hand in 1970, and in which 11 out of 20 forces have so far been covered, the average increase authorised in manpower is 12·5 per cent.

Mr. Dempsey: There is no increase in the number of men for beat patrol. Would the Under-Secretary agree that there is nothing more reassuring to the community than to see that diced cap patrolling the streets and highways? Does he realise that the beat man is a source of information and contact which could lead to the detection of criminals or, on the other hand, to their apprehension and conviction? All this is totally lost to him if he is travelling about in a police car. Has the Under-Secretary considered this?

Mr. Buchanan-Smith: I appreciate the hon. Member's constructive interest in police work, but how the men are deployed is for the discretion of each individual chief constable. I believe that increasing the authorised strength of police forces combined with other matters, such as the use of civilians to release uniformed policemen for more important work, means that some aspects of police work can be taken more fully into account.

Mr. Sproat: The Chief Constable of Aberdeen said recently that youth

violence is the most pernicious problem we face. In Aberdeen there are now two assaults every night and one very serious assault each week. There is a growing body of opinion which believes that the sentences given for assault are criminally lenient.

Mr. Buchanan-Smith: The latter part of that question is a matter for the courts. I am very much aware of the hon. Member's other remarks and I pay tribute to the work which the Scottish policemen do
day by day and night by night throughout Scotland in difficult circumstances. Each individual chief constable must achieve the right balance between using motorised forms of patrol, which give advantages of speed in reaching the scene of the crime, and use of men on the ground.

Fishing Rights (Loch Awe)

Mr. Dalyell: asked the Secretary of State for Scotland what discussions he had with the Scottish Hydro Board prior to its decision to sell off its fishing rights on Loch Awe.

Mr. Buchanan-Smith: The chairman informed my right hon. Friend some time ago that the board intended to dispose of these fishings.

Mr. Dalyell: If it is not the business of electicity producers to manage fishing interests, it is in the public interest to have some publicly-owned fishery rights. Should not the responsibilities then be given to the Forestry Commission, the Highlands and Islands Development Board or some other appropriate body?

Mr. Buchanan-Smith: Numbers of fishings are held by a number of public bodies. I do not think there is any evidence that this public ownership necessarily brings advantages to owners or anglers. What the board must do, as a matter for its commercial judgment, is to manage its assets in the best interests of consumers, which at the end of the day are reflected in the price of electricity.

Schoolchildren (Free Travel)

Mr. Adam Hunter: asked the Secretary of State for Scotland what further guidance he has issued to local education authorities in Scotland concerning the exercise of their powers to issue bus travel passes to schoolchildren, in view of the


imminent increase in the school leaving age.

Mr. Monro: Raising the school leaving age does not affect the duty of authorities to provide free travel for pupils who live beyond the statutory walking distance and they already have discretion to provide such other free or assisted travel as they consider necessary. I do not consider further guidance is needed.

Mr. Hunter: Does not the hon. Gentleman agree that raising the school leaving age to 16 means that parents have an added financial burden in having their children educated and that the whole question of school transfer should be reviewed? Is he aware that many parents whose children have been transferred to the new comprehensive school at Inverkeithing are now making a financial contribution towards their children's education, whereas those who live two miles away from the school are not? Is not this tantamount to a surcharge, an added cost, for receiving education?

Mr. Monro: I cannot accept all that the hon. Gentleman says. I have written to him about Inverkeithing. I appreciate that anomalies arise when new schools are opened, but I have had very few representations about school transport and I do not feel there is sufficient demand to call for a special inquiry.

Mr. Ewing: On the question of the statutory walking distance, will the Minister accept that most education authorities merely measure the distance and if it is not over two miles they do not give free or concessionary travel? Is it not time they were directed to take into consideration the traffic conditions on the route to school and give a greater emphasis to that than to the statutory walking distance?

Mr. Monro: I am sure that all education authorities give special consideration to the special circumstances of the areas they represent. It would be wrong for my right hon. Friend to give them a direction in that regard. I am sure that they consider the matter very carefully.

Housing (Financial Provisions) (Scotland) Bill

Mr. James Hamilton: asked the Secretary of State for Scotland what

recent communications, oral and written, he has received from local authorities regarding the implementation of the Housing (Financial Provisions) (Scotland) Bill; and what replies he has given.

Mr. Younger: The only recent representations not relating to practical details have been from Glasgow Corporation. I met a deputation from the corporation on 26th June and reaffirmed the Government's confidence that local authorities will implement the Bill because of the considerable benefits it will confer on families with low incomes and authorities with major housing problems.

Mr. Hamilton: Is the hon. Gentleman aware that only recently there was a meeting of local authorities in the West of Scotland when they decided that they would not implement the Bill? Will the hon. Gentleman now tell us what he refused to tell us in Committee; what action the Government will take if local authorities refuse to implement the Bill? As a further compromise, will he agree that even at this late stage there should be an Amendment in another place to reduce what he called the 50p, so that local authorities may have further discussion with him with a view to making this confrontation less severe?

Mr. Younger: I am well aware that certain opinions have been expressed on the subject, but as the Bill has not yet been passed by Parliament it is premature to take up firm positions on its implementation. I well respect the views of those who may agree or disagree with the Bill but all of us, whoever we are, are subject to the law of the land. I am confident that that is the general view of all concerned.

Mr. Ross: Is it not essential that the law should be reasonable? The hon. Gentleman said that the Bill has not yet become law. It has become law. Judging by Amendments accepted in another place, it will need to return here and it looks as though it will not become an Act until late this month or early next month. As many of its provisions do not become law until one month after its passing, if the hon. Gentleman finds it difficult to tell us what he will do about implementation in respect of his duty, how can a local authority be expected in one month to make all the preparations for this infamous Measure?

Mr. Younger: I am not sure what the right hon. Gentleman meant by saying that the Bill had become law, because it has not. [Interruption.] I may have misheard the right hon. Gentleman.

Mr. Ross: The hon. Gentleman had better wash his ears.

Mr. Younger: It is kind of the right hon. Gentleman to make a helpful suggestion. The Bill is entirely reasonable, and I have spent a good deal of time in the past few months explaining why. But it is fair enough for the right hon. Gentleman to disagree with me. There is nothing new about an Opposition disagreeing with the Government. What is at issue is the implementation of the Bill. I am confident that local authorities will have plenty of time to take reasonable steps to implement the Bill once Parliament has passed it. I shall give every possible assistance to local authorities to do that in a smooth and orderly manner.

Agricultural Intervention Board

Mr. Maclennan: asked the Secretary of State for Scotland if he will indicate the proposed location, and describe the staffing arangements and functions, of the Scottish regional office of the Agricultural Intervention Board.

Mr. Buchanan-Smith: The location has not yet been decided. The office will accommodate staff co-ordinating the activities of field staff engaged on intervention work, providing information to the trade and carrying out functions of audit and financial control.

Mr. Maclennan: Does the hon. Gentleman agree that by the centralisation of the board in Reading under the Minister of Agriculture, Fisheries and Food the Secretary of State has surrendered control over an important aspect of the Scottish agricultural economy? Will he say however, that the Government are not averse even now to seeking special régimes of assistance for Scottish agriculture which can be administered by his office?

Mr. Buchanan-Smith: I totally disagree with the first part of the hon. Gentleman's question, because the board is answerable jointly to the agricultural Ministers, including my right hon. Friend

the Secretary of State as well as my right hon. Friend the Minister of Agriculture, Fisheries and Food. There are very good reasons for its location in Reading and they were spelt out in considerable detail by my right hon. Friend the Minister of Agriculture in the House on 22nd June.

Mr. Buchan: Regardless of whether the board will ever come into existence, the Government's action in announcing accidentally in the course of a debate in the House that the board would be sited at Reading, without spelling out the reasons for sending it there, has shocked many people in the industry. Does not the hon. Gentleman agree that it runs entirely counter to the whole dispersal policy of the previous Government as well as of the present Government? Will he now consider establishing the main office of the board in Scotland or in another development area?

Mr. Buchanan-Smith: It comes ill from a member of a previous Government which sited the Forestry Commission at Basingstoke to talk like that. Either the hon. Gentleman did not attend the debate on 22nd June or he did not read the OFFICIAL REPORT afterwards. In that debate my right hon. Friend made a carefully prepared statement on precisely what the functions of the board are and why it is going to Reading.

Scottish Economy

Mr. Strang: asked the Secretary of State for Scotland if he will provide funds for the establishment of an independent Scottish Economic Institute to investigate problems of the Scottish economy, with a status comparable to that of the National Institute of Economic and Social Research.

Mr. Gordon Campbell: The Scottish Office already employs 18 economists; and close contact is maintained with research undertaken in the economics departments of Scottish Universities.

Mr. Strang: While I acknowledge the valuable work done by both the Scottish Office and the Scottish Council, may I ask whether the right hon. Gentleman agrees that there is a strong case for an independent institute in Scotland which could study in depth important aspects of the Scottish economy? Had such an institute been in existence to study in depth the


implications of the oil find, the reaction of the Government and British industry might well have been more successful.

Mr. Campbell: On the hon. Gentleman's last point, the difficulty has been that until very recently nobody knew whether there would be any oil finds. As has already been pointed out, when the Gaskin Report was published three years ago it did not even refer to oil because it had not then appeared on the scene. That is why we must now await even further exploration, which I am sure will provide us with interesting discoveries. As to economic advice, I have the advantage of the panel of economic consultants from the universities which advises the Scottish Office.

Mr. Bruce-Gardyne: Will my right hon. Friend resist the proposal and not touch it with a barge pole? Is he aware that the National Institute has an enviable reputation for the falsity of its forecasts and that with the gratuitous advice the Scottish Office receives from time to time from bodies like the Scottish Council and the STUC there is no need for further sources of dubious counsel?

Mr. Campbell: I do not wish to enter the lists with my hon. Friend on these points, but I think that the suggestion was put forward as a serious suggestion and I accept it as such. However, I differ with the hon. Member for Edinburgh, East (Mr. Strang) about the question of oil because I do not think that the sort of body he suggests could give us any more help than those who are very much engaged in dealing with this problem.

Mr. Douglas: Will the right hon. Gentleman concede that such a body might come to the conclusion that we would have to continue some form of regionally differentiated REP subsidy beyond 1974?

Mr. Campbell: That is a separate question. The hon. Gentleman knows the Government's position on this matter. REP is due to be phased out after September, 1974.

Forestry

Mr. David Steel: asked the Secretary of State for Scotland what action he proposes to take following publication of the Forestry Policy Review recently published by the Forestry Commission.

30. Mr. Maclennan: asked the Secretary of State for Scotland if he will make a statement about the future of forestry in Scotland.

Mr. Buchanan-Smith: My right hon. Friends the Secretary of State, the Minister of Agriculture, Fisheries and Food and the Secretary of State for Wales await the views of interested bodies on the consultative document which they published on 28th June.

Mr. Steel: Can the hon. Gentleman say how soon it will be before the new scheme of private grants is settled and introduced, because in my constituency some applications have been hanging fire since the cessation of the old scheme? Does he agree that, in tying grants to employment, it is extremely important that the employment should be, as far as possible, rural residential employment rather than gang employment within a development area?

Mr. Buchanan-Smith: I cannot give the hon. Gentleman a precise time when we shall announce our conclusions, but consultations are starting. On Friday this week my right hon. Friend the Minister of Agriculture and myself will be meeting private growers to discuss the matter. We are aware of the urgency of the matter and the concern that planting plans by private industry should not be held up. I will take into account the view expressed in the second part of the hon. Gentleman's supplementary question.

Mr. Brewis: Can my hon. Friend tell me how much the saving is likely to be in the private sector as a result of a reduction in the dedication scheme?

Mr. Buchanan-Smith: It is impossible to say whether there will be a saving and, if so, what it will be, because no alternative scheme has been brought forward to replace it. The purpose of the consultations is not to take grants from private woodland owners but to replace the existing dedication scheme with a more up-to-date scheme, because the present scheme was based on wartime conditions?.

Mr. Maclennan: The Government's proposal to cut back forestry planting from the Labour Government's target of 60,000 acres by 1976 to 50,000 acres is


unacceptable throughout Scotland. Does the hon. Gentleman accept that there is widespread concern that the revised target of a 3 per cent. return on capital per annum may lead to the acquisition of areas which are not as socially desirable for planting purposes as some of the less profitable areas near the tops of the hills? Does the hon. Gentleman agree that the Government, in giving consideration to this question, should note the concern which has been widely expressed that the proposals do not make adequate provision for the apportionment of land between agriculture and forestry?

Mr. Buchanan-Smith: Whether the proposals in the consultative document are acceptable to the commission depends primarily on whether land is available for it to plant. The commission would have had to come to us to seek to be relieved of the task of meeting the target set before because the land has not been available. We propose something very much more realistic in the consultative document and it is understood by the commission to be so. I agree with the last point made by the hon. Gentleman. I should like to see far better integration between agriculture and forestry because they are not in conflict and, properly managed, they can work together to improve the countryside and the economy of the countryside.

Icelandic Fishing Limits

Sir J. Gilmour: asked the Secretary of State for Scotland what estimates he has made of the effects on the Scottish fishing industry of Iceland's fishery limits being extended to 50 miles; and if he will make a statement.

Mr. Buchanan-Smith: The effects of exclusion from the Icelandic grounds would undoubtedly be serious for the United Kingdom fishing industry as a whole, but I am afraid it is not possible at present to make a precise estimate of the possible effects on any particular sector of the industry.

Sir J. Gilmour: In view of what my hon. Friend says about the undoubted devastating financial effects on the Scottish fishing industry of the extension of the limits, will he urge everyone to co-operate in resisting Iceland's demand for an extension, otherwise the limits will

be extended by other countries such as the Faroe Islands?

Mr. Buchanan-Smith: If the worst happened, our deep sea fishing boats from places like Granton and Aberdeen would be fishing in inshore waters, which would have tremendous adverse effects on Scotland's inshore fleet. The attitude of the Scottish National Party in supporting the 50-mile limit is incomprehensible in view of the realities of the Scottish fishing situation.

Mr. Ronald King Murray: I associate the Opposition with the point made by the hon. Member for Fife, East (Sir J. Gilmour). In this situation of an almost inevitable decline in the Scottish fishing industry, may I stress to the Under-Secretary of State the importance of devoting more public money to research into fish farming?I am advised that in the long term it has excellent prospects of success but that what is needed is financial support. This might have the additional advantage of serving notice on the Icelandic Government that if fish farming is a success they may in future be looking for markets.

Mr. Buchanan-Smith: I accept what the hon. and learned Gentleman said about fish farming, into which the White Fish Authority is doing research. The Government are helping and there are a number of private individuals and private firms involved in it. However, despite the possibilities of fish farming, what concerns me is that in the Scottish inshore fishing industry we have an extremely healthy and prosperous industry which gives employment in areas where very few alternative forms of employment are available, and we must view very seriously indeed anything which might hurt it.

Mr. Donald Stewart: Will the hon. Gentleman accept that it was the extension of the Icelandic limits which brought about the original extension to 12 miles which benefited the inshore fishermen and that Britain was the last North Sea nation to extend the limits round the British Isles? Will he refrain from accepting the advice of his hon. Friend the Member for Fife, East (Sir J. Gilmour)? The contrary view should be accepted. It ill becomes the hon. Gentleman to speak in the way he has because the Government sold out


the fishery interests in the Western Isles even before they knew what the EEC terms were. The hon. Gentleman should not cast aspersions on the Scottish National Party.

Mr. Buchanan-Smith: I would listen to the hon. Gentleman if he understood the realities of the fishing situation, but the fact that his party makes such statements about the Western Isles, saying that the whole of the Minch would be open to foreign fishing when it would not, shows how little it understands the industry. That is why it is important to put the record straight.

Tyre Factory (Perth)

Mr. MacArthur: asked the Secretary of State for Scotland what representations he has received following his decision to accept the reporter's findings regarding the proposed new tyre factory near Perth; and what action he has taken.

Mr. Gordon Campbell: In addition to the representations made by my hon. Friend himself, I have had three letters, from the Lord Provost of Perth, from a former Lord Provost and from the Perthshire Chamber of Commerce expressing their disappointment but their readiness to assist the firm concerned to select another location.
The Department of Trade and Industry has been in touch with the firm and, at Michelin's request, matters are being held over until September to enable it fully to reassess its position. A meeting will then be held between representatives of the firm, the Department of Trade and Industry, my Department and the local authorities concerned.

Mr. MacArthur: Is my right hon. Friend aware that it is critically important to Perth that this development should go there? Will he between now and September do everything in his power to encourage the company to develop its factory at the Inveralmond industrial site in Perth and call the attention of the factory and of the local authorities to the grants now available, which are very different and very much larger than those in force when the company first assessed the site?

Mr. Campbell: I am aware of the importance of this development to Perth and we are making sure that the firm

knows what is available in the way of new grants. As I think my hon. Friend knows, the firm does not propose to start the work for some time because it is concentrating first on the factories at Dundee and Aberdeen which are in train.

Psychiatrists (Reports on Children)

Mr. Carmichael: asked the Secretary of State for Scotland what total sums have been paid to National Health Service psychiatrists for their services in examining and reporting on children referred to them by the children's panels.

Mr. Monro: Records of payments of this kind to individual psychiatrists are not maintained in my right hon. Friend's Department.

Mr. Carmichael: Does the hon. Gentleman agree that payments are made? Is he aware that a number of psychiatrists refuse to accept payments, believing that they should be part of the community assessment of the people referred by the panel? In addition—and this is more important in some ways—they do the work during National Health Service time and they use National Health Service facilities. Therefore, they do not see why they should be paid for doing a job like this.

Mr. Monro: I note that there are a number of psychiatrists who are unwilling to accept a fee. Under their contracts with the regional hospital board they are entitled to a fee should they wish it, but they do not have to accept the fee and need not apply for it.

Mr. David Steel: Will the Undersecretary of State accept that it would be useful for his Department to issue guidance to children's panels on this matter? Not only psychiatrists but also general practitioners vary very much in the practice of charging fees for advising panels. Does not the hon. Gentleman agree that there should be standard practice?

Mr. Monro: Again, I note what the hon. Gentleman says. If he feels that there is some misunderstanding about this, I will look at it and, if necessary, give guidance to the panels and the psychiatrists.

Dr. Miller: Will the hon. Gentleman tell us whether there is any truth in recent statements that there is a considerable shortage of psychiatrists in Scotland for these and similar jobs? If there is a shortage, what are the Government doing about it?

Mr. Monro: It is difficult to be certain whether there is a specific shortage. The numbers have increased substantially in the last few years and we have recently asked local authorities to give to regional hospital boards an indication of the number of psychiatrists required for this work. The Government are aware of this and are looking at the position carefully.

Scottish Business School

Mr. Douglas: asked the Secretary of State for Scotland if he will make a statement on the relationship between the Scottish universities and the Scottish Business School.

Mr. Monro: The school's formal constitution provides for each of the three universities, Glasgow, Edinburgh and Strathclyde, which contribute a division to the school, appointing five members to its council which has an independent chairman. The school's academic executive committee consists of the academic members of the council together with two further members appointed by each division.

Mr. Douglas: I accept that it is not the Minister's direct responsibility, but is he aware of the extreme disquiet in Scottish academic circles about the constitution of the Scottish Business School and the feeling that it should be widened to include all Scottish universities within its orbit of operations? Will the hon. Gentleman take urgent steps to call a conference of vice-chancellors of Scottish universities to discuss this important new venture?

Mr. Monro: I cannot accept the hon. Gentleman's criticism. This is after all only the first year in which the Scottish Business School has been in full operation, and it is going particularly well. The tripartite nature of the school has allowed it to develop as fast as one could wish. There is natural co-operation between all the universities in Scotland in relation to the Business School. I think the hon. Gentleman should allow the matter to rest

for another year or two before he puts pressure on universities.

Scottish Economic Council

Mr. Sillars: asked the Secretary of State for Scotland how many meetings of the Scottish Economic Council he expects to chair before the end of this year.

Mr. Gordon Campbell: Three.

Mr. Sillars: If the right hon. Gentleman takes the chair at the last meeting this year, does he expect to be able to announce an unemployment figure higher or lower than that obtaining now? Will he refrain from verbal flannel and give a one-word answer, "higher" or "lower"?

Mr. Campbell: The hon. Gentleman has been a Member of the House long enough to know that no Minister and no Government ever make forecasts about unemployment.

Maternity Facilities (Falkirk)

Mr. Ewing: asked the Secretary of State for Scotland if a decision has yet been made regarding the provision of additional and more modern maternity facilities at Falkirk Royal Infirmary.

Mr. Monro: A scheme for the development of maternity facilities in the Cumbernauld/Falkirk area is included in priority Band IV of the current major hospital building programme. Planning of this project will begin fairly soon.

Mr. Ewing: For the hon. Gentleman to refer to the Cumbernauld and Falkirk area is very significant. When the decision on the siting of the maternity facilities is taken will the Minister consider that it is much better to site them at the existing general hospital so that specialist facilities will be available on the spot, rather than to fragment the service by siting the maternity facilities apart from the general hospital?

Mr. Monro: Yes, we will take all those views carefully into consideration when the site is decided.

Coal and Steel Industries

Mr. Eadie: asked the Secretary of State for Scotland at what stage in consultation he has been associated with


announcements of contraction of the coal and steel industries in Scotland.

Mr. Gordon Campbell: Arrangements about the future of particular pits or plants are normally made by the industries themselves after consultaion with the trade unions concerned. My right hon. Friend the Secretary of State for Trade and Industry and I keep in close touch on related issues of concern to the Government.

Mr. Eadie: Is the right hon. Gentleman aware that the credibility of his Department is at stake? According to the newspapers, the Government were unhappy about the BSC making the steel redundancy announcement. Are we to take it that the Government wanted delay either to hide the position from the people or because they have no solution to the problem of the contraction of the coal and steel industries?

Mr. Campbell: Under the Act passed by the Labour Government nationalising the steel industry, the British Steel Corporation can take these decisions itself. It is for the corporation to carry out its duties under that Act.

Mr. James Hamilton: Will the right hon. Gentleman concede that the pricing of steel was a Government decision and not one taken by the British Steel Corporation? Will he also concede that the announcement was made without consultation with both his right hon. Friend the Secretary of State for Trade and Industry and himself and that both were deeply annoyed that the announcement was made? Is the right hon. Gentleman prepared to stand up and be counted on the whole question of the steel industry in Scotland and to say that he will lead us in the fight for a Hunterston steel complex?

Mr. Campbell: The British Steel Corporation does not need to consult the Government under the terms of the steel nationalisation legislation enacted by the Labour Government. As stated in a reply to a Question at the beginning of last month, there have been 6,000 redundancies in the Scottish steel industry in the past five years. Therefore, the announcement did not greatly change the tempo of redundancies. The Government are, of course, very much concerned about the effects of the necessary closing

of open-hearth furnaces, which was discussed in the House some weeks ago, and we shall do all we can to make sure that where redundancies occur jobs are made available.

Mr. Bruce-Gardyne: Can my right hon. Friend say what contribution was made by the miners' strike in the spring to the contraction of the coal industry in Scotland?

Mr. Campbell: Not without notice.

Oral Answers to Questions — QUESTIONS TO MINISTERS

Mr. English: On a point of order, Mr. Speaker. Would you draw the attention of the right hon. Gentleman the Leader of the House to the position of Questions to him as Lord President of the Council on Scottish Question days? In view of the speed of progress of my Scottish colleagues, it may be desirable to put the right hon. Gentleman's Questions at position No. 10 or thereabouts. On these days we do not reach the Questions tabled for answer by the right hon. Gentleman relating to the whole of the United Kingdom. I know that my Scottish colleagues wish to ask local questions, but it would be possible for them to do so in the Scottish Grand Committee.

Hon. Members: Oh.

Mr. Speaker: This is most certainly not a matter for the Chair, whatever the Chair may feel about it. It is a matter for the usual channels.

DEXTROSE SOLUTION

The Secretary of State for Social Services (Sir Keith Joseph): With permission, Mr. Speaker, I should like to make a statement on the report of the Committee which, the House will recall, I appointed under the chairmanship of Mr. C. M. Clothier, QC, to inquire into the circumstances which led to the use of contaminated dextrose infusion fluids at Devonport Hospital and which involved the death of five patients. The report has been published today and copies are available in the Vote Office.
The Committee concludes—in its own words in paragraph 79—
that the fundamental cause of this disaster is to be found in human failings at Evans


Medical, ranging from simple carelessness
to poor management of men and plant. The Committee heard of no imminent technological advance in the field of production of intravenous fluids which will eliminate the need for skilful men devoted to their work. The Committee considers that too many people believe that sterilization of fluids is easily achieved with simple plant operated by men of little skill under a minimum of supervision, a view of the task which is wrong in every respect".
The Government accept the report, and I have referred to the Medicines Commission a number of technical recommendations. These include consideration of the use of plastic containers, methods of identifying individual batches of dextrose, sterility testing methods, the possibility of incorporating bacterial filters and technical advice on the maintenance of autoclaves. There are also recommendations on prevention of contamination during cooling and after distribution.
Steps have been taken in my Department to improve its methods for dealing with reports of defective supplies. I have had extracts from the report which illustrate good practice in the production of infusion fluids circulated to manufacturers of sterile products. A meeting with nurses, doctors and pharmacists to discuss a number of points on hospital procedure has taken place and recommendations will be circulated as soon as they are finally agreed.
Officers of my Department have visited a sample of hospitals and identified in some of them necessary improvements in the organisation of sterilising facilities. Some can be made at once and others only after suspension of operations for a period. These hospitals have been advised accordingly. All hospitals within the National Health
Service which produce their own sterile infusion fluids have been asked to examine their production methods in the light of the "Guide to Good Pharmaceutical Manufacturing Practice". Where the organisation requires improvements which cannot quickly be secured, hospitals have been asked to seek other sources of supply until the necessary improvements have been made.
I should like to thank Mr. Clothier and his colleagues for their urgent and penetrating review of the causes of this tragedy, and for their technical and other recommendations. Some have already

been acted upon: all will have urgent attention.

Dr. Summerskill: We welcome the fact that this inquiry has now been concluded, and also welcome the Secretary of State's statement. It is to be deplored that human failings were the main cause of the tragedy, but it is hoped that all who are concerned with the preparation of infusion fluids will take a lesson from this case. I include in that remark the management and the laboratory staff.
When will the second and wider inquiry by the Medicines Commission make its report since that inquiry covers major issues which were not covered by the Clothier inquiry, including methods of production, distribution, storage and use of infusion fluids? When will the Secretary of State report on the Kettering general hospital incident, which has taken place since the Devonport incident? Although there were no deaths at Kettering, similar issues were involved there.
The right hon. Gentleman in his statement said that only a sample of hospitals
had been visited by officers of his Department. Could he say what sample this was? Are we to conclude that other hospitals will not be visited? Will he consider some inspection of every hospital in the long term? Indeed, will he consider setting up an inspectorate on the lines of the Medicines Commission Inspectorate, which concerns itself with quality control? Clearly, it is insufficient to have inspection of only a sample of hospitals.
Finally, would the right hon. Gentleman bear in mind that we welcome the fact that the review by his own Department on emergency procedures covering incidents such as the one at Devonport is taking place?

Sir K. Joseph: I agree that there are lessons for all to be learned from this report.
In answer to the hon. Lady's first question, I should like to point out that the Medicines Commission is proposing to make an interim report on a number of issues. When I have had its judgment, I intend to report to the House, by an answer in Hansard, the date when it expects to complete its task.
In regard to the incident at Kettering, my Department is discussing with the manufacturers a number of modifications in their procedures, but none of this should in any way be interpreted as casting doubt on the quality of the firm's products.
In reply to the third question, I should point out that the hospitals visited were a random sample. I intend to set up a continuing system of inspection of infusion fluid products.

Mr. Pardoe: Is the right hon. Gentleman aware that it is not only those of us who have lost constituents in this tragedy who feel that the report is a deeply worrying document, since it reveals alarming inadequacies in one of the best known medical firms in the country? Will he clear up one point on paragraph 79 of the report, which says that
…too may people believe that sterilisation of fluids is easily achieved…"?
It is not immediately obvious just who these people are. Is he satisfied that they existed only in Evans Medical—or in other firms, in hospitals, or even in his Department?

Sir K. Joseph: I think that if all of us were put under test we would have said—and I confess that I am one who would have said it—that in a world with infinitely sophisticated medical techniques the production of infusion liquids was not one of the more sophisticated ingredients. To that extent this shock may, at desperate human cost, have done great good to the whole community. Out of the alarm of this report, to which the hon. Member for Cornwall, North (Mr. Pardoe) referred, much good may legitimately emerge for the future.

Dame Joan Vickers: I thank my right hon. Friend for the manner in which he has had this inquiry conducted, and I congratulate Mr. Clothier and his colleagues on doing such excellent and detailed work in such a short time. I am also grateful to Dr. Meers for his report on page 30. In this connection, the junior staff are to be praised because it is they who were the first to have suspicions that all was not well.
I hope that my right hon. Friend will take very seriously the recommendations

on page 23 of the report, especially Nos. 7, 8 and 9. These seem to be the crux of the matter. If we can get this recommended quickly and efficiently, it should help.
Finally, as one who lost several constituents in this tragic affair, may I ask my right hon. Friend what compensation will be given to the relatives of the victims?

Sir K. Joseph: I cannot enter into the last point, which is for the individuals concerned. But on my hon. Friend's previous point, the Medicines Commission is studying the recommendations in chapter 6 to which my hon. Friend referred and will be making a later report on them. I am sure that all the individuals concerned with production will be studying this report deeply, as will my Department.

Mr. Heffer: In the interests of Evans Medical and of people all over the country who use the firm's products, can the right hon. Gentleman indicate the present position at Evans Medical? What has the firm done to ensure that this will not happen again? Is the right hon. Gentleman in a position to tell the world that the company has made efforts to clear up this situation? Secondly, can the right hon. Gentleman say in much more detail than he has given us today what future plans there are for inspection both at production and at use level so that there is inspection of these products at both points of importance? Thirdly, is it not regrettable that it appears that middle management was primarily responsible for this situation? Again, can the right hon. Gentleman indicate whether the firm has dealt with that problem?

Sir K. Joseph: As for Evans Medical, this report reflects only on the company's production of infusion fluids. The embargo still bites on that production and will continue to do so until we have agreed with the firm about its new procedures. As for inspection, the report makes it plain that no pattern of inspection will guarantee the country against occasional incidents. Only application to duty by all levels of management and staff and by people in the distribution and use chain can save the country from future incidents. It means that we have


to tighten up procedures at every stage in the process. I agree that on this occasion further damage was prevented by the timely vigilance of hospital staff. I am discussing with the professions the degree to which we can increase the training and vigilance of all hospital staff concerned. But I fear that there is no easy way out by way only of an inspection system. An inspection system must be part, but only part, of our safety measures.

Dr. Miller: Will the right hon. Gentleman accept that it is not quite such an easy matter to produce sterile solutions as one would imagine but that it is not impossible? Does he agree that it is tragic for someone to have reached the stage of recovering from a serious illness only to die because of an awful catastrophe of this kind? Does he agree also that it is equally a terrible tragedy from the point of view of the medical profession? However, since the offending fluid was actually septic at the time that it left the laboratory and did not become septic during its transit to or its being deposited at the hospital, will he turn his mind to the testing of it before it is used? I do not suggest that it should be done immediately before use. But could batches of infusion be tested several days before they are used, making sure that the storing of them in hospitals is done in conditions which will keep them sterile?

Sir K. Joseph: This is the third time that the hon. Gentleman has made this point to me. I must now promise him that I shall pass that suggestion to the Medicines Commission for consideration.

Dr. David Owen: I join the congratulations to members of the staff at Devon-port Hospital for their remarkable skill in picking up the early signs of this. Will not the right hon. Gentleman agree, however, that the most alarming part of this report is not brought out in it? It is that in May, 1971, 666 bottles of this sub-batch were dispatched to various parts of the country, that only 155 have been traced, and that a third of them were found to be contaminated. That seems to indicate that some 511 bottles of the sub-batch have not been traced. It is reasonable to expect that a third of them may have been contaminated. We are dealing, therefore, with a potential tragedy which

may involve 170 bottles of contaminated fluid that has been used already, and no one has known about it. Is not it right that the committee should have spent some time looking at this rather more worrying aspect as well as at the small number of cases at Devonport, in view of the wider implications for the whole distribution system?

Sir K. Joseph: The evidence is that the other bottles were probably used with no ill-effects. The batch all went to that region.

Mr. Carter-Jones: I thank the right hon. Gentleman for his prompt action in this matter, and I think that both sides of the House will agree he has been very forthcoming. However, will the right hon. Gentleman agree that this incident may result in a setback to progress in medicine? As his Department is the prime buyer, cannot he monitor the whole system of medicines?

Sir K. Joseph: That is the idea behind the Medicines Act, under which licensing will shortly come into force. Much can be done through control by way of licensing. However, the report reminds us that no human system of inspection that would be practicable can possibly catch every error and, therefore, that the country must be able to depend upon the procedures and the diligence of all elements in the chain.

Mr. Robert Hughes: Does not the right hon. Gentleman consider that urgent action is necessary to establish an inspectorate? I accept that no amount of inspection can guarantee success, but it could guarantee that the equipment in use is of the highest standard and that it is kept maintained to that standard. Bearing in mind that the report refers to the quality of management, does the right hon. Gentleman consider that perhaps bad management might be regarded as criminal negligence when lives are at stake?

Sir K. Joseph: That last question is not for me. But in considering the inspectorate process I shall seek to learn much from this report.

Mr. Pavitt: Does the right hon. Gentleman's reference to the Medicines Commission mean that this matter will be


examined by the Committee on the Safety of Drugs? Will the right hon. Gentleman look at the machinery operating in relation to this kind of problem? With regard to inspection at the point of delivery in hospitals, which is a long and complicated question, when the right hon. Gentleman comes to make a further announcement, will he give the House more details about how this can be pursued effectively throughout all our regional hospital board areas?

Sir K. Joseph: I do not anticipate having to make another statement to the House. The Medicines Commission is pursuing the subject of this report by way of a special committee which will make an interim report to me in due course.

INDUSTRIAL RELATIONS ACT, 1971 (REPEAL)

3.49 p.m.

Mr. Roy Hughes: I beg to move,
That leave be given to bring in a Bill to repeal the Industrial Relations Act, 1971.
It is wrong to say that we had no framework of law on trade unions or on collective bargaining before the Industrial Relations Act. We had a framework. Though not perfect, it worked. In its ability both to reconcile and give expression to the various interests involved, it was probably ahead of anything in the western world.
What did the Industrial Relations Act set out to do in changing the legal framework? To reduce strikes? Everyone knows that strikes are bigger today than ever before and the number of working days lost through them in the first five months of this year was 14,401,000, which is more than in any previous full year since the General Strike in 1926.
Again, inter-union and intra-union disputes had, thanks to the TUC initiatives since the Donovan Report, become things of the past. Today, thanks directly to the new Act, they are on the increase again.
It is true that we have fewer strikes, but it is obvious that if there are bigger, longer strikes, there will be fewer strikes. The short, sharp "downer", which lasted a day or two and often focused attention on serious discontent and got something done about it, has given way to marathon confrontations involving hundreds of thousands of people who have never been on strike before. I am not saying that these big strikes are all due to the Act. I am saying that there can be no improvement in industrial relations whilst the Act remains.
Did the Act set out, as Ministers claimed, to strengthen trade unions? If so, why should every trade union oppose the Act, even those which are often spoken of as right wing and so-called "responsible"? It would be odd indeed for all trade unions to oppose their own strengthening.
Did the Act set out to cut the bargaining power of workpeople? This is what trade unionists genuinely believe, although


it has never been stated by the Government. This is what the Press believes and, I suspect, what hon. Members opposite in their hearts believe. But the Act has, paradoxically, united trade unionists against employers, turned moderates into militants, made every industrial relations issue into a political issue, and made popular those who seek to disrupt for the sake of disruption.
Do we want to cut trade union bargaining power? Do we want to increase profits at the expense of wages? Or do we want that high-wage high-productivity enonomy that can come only from integrative bargaining between equals? Certainly the people we represent, whether they vote Conservative, Liberal or Labour, do not want to see wages cut for the sake of higher profits.
The Act rests upon two concepts. The first is the registration of trade unions, and the second is legally enforceable collective agreements. Before the Act came in the majority of trade unions were registered. Today, out of 10 million trade unionists affiliated to the TUC, 8,362,030 have already de-registered and a further 353,855 are taking steps to de-register. Only 8 per cent. are still in trade unions that intend to remain registered. When those trade unions lose the protection of the Bridlington Agreement their numbers may well dwindle further.
None of the 10 million trade unionists is working under legally enforceable collective agreements. Most of the country's leading employers—ICI, Ford, Unilever, British Leyland, Shell, and many more—have publicly agreed that their collective agreements should not be legally enforceable. The nationalised industries and the Civil Service have also agreed to what is becoming known as the Tina Lea clause, which means "This Is Not A Legally Enforceable Agreement". So, on its two legs, the Industrial Relations Act is already crippled. It is already "on ice". There is not the slightest indication that this position will alter in any way.
But the acrimony which the Act
induced remains. What is really disastrous about the Act is that it is leading the law into contempt. No reform, however benevolent, is worth that. Prohibition did it in America and unleashed the disastrous period of gangsterism in the early 'thirties. Ordinary men and women in my constituency and up and down the

country are being driven against the law; and they are right, because the law is wrong; but that is the road to anarchy.
The Act is literally poisoning industrial relations in Britain. Industrial relations will continue to be poisoned—I do not think we have yet seen the worst—until the Act is repealed and we turn over a new leaf. Only the lawyers are doing well out of it.
We were indeed, prior to 1971, making good progress in more enlightened collective bargaining. Trade union research departments were beginning to provide information that had never before been made available to trade unionists. Look, for example, at the positive agreements submitted to ICI last year. I have a copy in my hand. Today those same research departments are busy reading law books and court reports. Shop stewards were beginning to participate in raising productivity. Today they are busy reading law books. Personnel managers were beginning to get a major voice in industrial management and improving communications from and to the shop floor. Today they, too, are busy reading law books. Privately, every personnel manager I know thinks the Act is a disaster, and the advice of the Institute of Personnel Management on the consultative document appears to have been completely ignored.
The Government are obviously in a difficult position and will oppose this Motion. But there are hon. Members opposite, as on this side of the House, who have often stated that they will put their consciences and the interests of the nation above party politics.

Mr. John Page: Where are they?

Mr. Hughes: I ask those hon. Members to examine their consciences now and ask themselves: is the Industrial Relations Act, as things stand and in the foreseeable future, in the country's interest? I ask them honestly to support the Bill.
There are some who say that there are some good things in the Act which should be retained, even if the bad things should be repealed. I should like to see statutory protection against arbitrary dismissals, for example. Even in this regard, however, the Act is sadly behind the best


practices in many countries. Much more important, any Clause, however benevolent, that comes in the cover of the detested Industrial Relations Act will get scant attention or support from the majority of trade unionists. So why not wipe the slate clean and start again? It would be a simple measure to legislate against arbitrary dismissals after this Bill is passed. In fact, in the last Parliament I made two attempts under the Ten Minutes Rule to introduce a Bill to do this very thing.
Anyone can make a wrong decision for the right reasons. Anyone can find that
measures which he honestly believed would improve a situation end up by making that decision disastrously worse. But a big man, having found that he has taken the wrong advice, admits it. Only little men persist in perpetuating a mistake after experience has proved that the situation is daily deteriorating. Britain takes kindly to big men, even if she does not always agree with them on all matters.
Many years ago the late Sir Winston Churchill, in this House, said:
It is not good for trade unions that they should be brought in contact with the courts, and it is not good for the courts. The courts hold justly a high and, I think, unequalled prominence in respect of the world in criminal cases, and in civil cases between man and man, no doubt, they deserve and command the respect and admiration of all classes in the community, but where class issues are involved…it is impossible to pretend that the courts command the same degree of general confidence. On the contrary, they do not, and a very large number of our population have been led to the opinion that they are unconsciously, no doubt, biased…We know perfectly well that the trade union movement ought to develop, ought not to be stereotyped, ought to have power to enter a new field, and to make new experiments…We wish to set the trade unions free to develop their efforts, to build up in this country a minimum standard of life and labour, and to secure the happiness of the people."—[OFFICIAL REPORT, 30th May, 1911; Vol. xxvi, c. 1022–4.]
Britain takes kindly to big men, but it does not take kindly to fools.

Mr. Speaker: Order. The Bill is being introduced under what is called the Ten Minutes Rule. The hon. Member has spoken for 11 minutes. The Standing Order says that "if he thinks fit" Mr. Speaker may permit a brief explanatory statement. I sometimes wonder what would happen if I did not think fit.

Mr. Hughes: The Bill would restore the legal position to what it was before the Industrial Relations Act became law. On that day sterling stood at $2·60. Today, sterling has dropped more than 8 per cent., and the financial Press has widely stated that the cause of the run on sterling was the threatened imprisonment of three dockers under the Industrial Relations Act.
If we could turn over a new leaf, if we could restore the confidence of ordinary working people in Government, if we could encourage the TUC really to get down to business with the CBI in working out new methods of arbitration and conciliation for the avoidance of disputes, reductions in strikes, increases in productivity and the will to work together, this would have an electrifying effect on sterling. I believe that we would see sterling back not at $2·60 but at $2·80. The prices of imported food and raw materials would fall. Exports, without the current wave of industrial unrest, would boom. Even more important, I believe that Britain would be a happier place in which to live.
According to an opinion poll in this week's Investors Chronicle &amp; Stock Exchange Gazette of 7th July, 1972, only 38 per cent. of a sample of stock brokers——

Mr. Speaker: Order. I must ask the hon. Member to move his Motion.

Mr. Hughes: —investment trust managers, merchant bankers and investment advisers thought that the Industrial Relations Act "will work", 57 per cent. thought that it should either be changed now or scrapped altogether and the other 5 per cent. "didn't know". When I find myself in agreement with the late Sir Winston Churchill and the Investors Chronicle &amp; Stock Exchange Gazette, then I know that we cannot all be wrong.
No Member on this side of the House——

Mr. Speaker: Order. I now ask the hon. Member for the third time to move his Motion.

Mr. Hughes: I ask the House to support the Bill and accept the Motion.

4.2 p.m.

Mr. Adam Butler: I rise to oppose the introduction of the Bill, briefly, I hope, but it is a matter of great consequence, although that is not entirely clear from the shortage of hon. Members on the benches opposite.
The speech of the hon. Member for Newport (Mr. Roy Hughes) was predictable and the usual mixture of fallacy, misrepresentation and threat. I question whether he was not wasting the time of the House, since an Opposition Motion for the same purpose was defeated contemptuously in the House only 10 days ago.
The hon. Gentleman's charge is that the Act is disliked by everybody and is not working. Let me tell him the facts. Recent polls have shown that the majority of people in this country welcome the Act. They want the same sort of civil law in industrial relations as that to which they are accustomed in their everyday life which protects them from the antisocial behaviour of the neighbours. They want that same civil law to operate at their place of work, and that is the principle of the framework of law established by the Industrial Relations Act.
During the recent rail dispute, without question commuters welcomed the cooling-off period. It prevented massive disruption to our train services and a great deal of inconvenience to themselves. All workers are benefiting from longer periods of notice and improved contracts of employment under the Act. Do they reject it? Further, 2,000 individual workers with complaints about unfair dismissal and infringement of their trade union rights have been glad to make use of the tribunals and the conciliation services under the Act. Do they reject it? Other groups of workers have used the Act to gain recognition. Do they reject it? The 60 workers at Chobham Farm—members of the hon. Gentleman's own union, the TGWU—saw the new law and the courts as a last resort in trying to save their jobs.
What of the trade union movement as a whole? The hon. Gentleman tried to make some play of this, but unions representing 2½ million workers are still registered, of whom more than 1½ million are affiliated to the TUC. Despite the

strongest pressure brought on them and the demands of union solidarity, they have their names on the permanent register. These include the shopworkers, the seamen, the Association of Scientific, Technical and Managerial Staffs, by a vote of members, and the Electrical and Plumbing Trades Union, by the vote of executive. All these see the benefits which come for their membership from the Act.
Would the hon. Gentleman repeal the Code of Practice, which is based on the best practices in industry? The Act has brought the spotlight to bear on our industrial relations problems and it is already activating improvements. Its effect will be long term, but it is clearly working; yet the Bill is attempting to repeal it.
I refute absolutely the allegation that the content of the Industrial Relations Act is responsible for the present state of industrial relations. The charge which I lay at the door of members of the Labour Party is that by deliberate misrepresentation and distortion and through blind political prejudice they have used the Act, through their opposition to it, to frustrate and obstruct that very move on the part of the trade union movement towards co-operation with the Government in solving the nation's problems which is now, at last, taking place. Hon. Gentlemen opposite would do well to quench their hostility and, with a little humility, try to understand what the Act is about. They should encourage their trade union friends to co-operate with it, to the advantage of their members and the nation.
In putting forward the Bill the hon. Gentleman is, unfortunately, doing just the opposite, and apparently he is supported by his hon. Friends. They are creating uncertainty when there should be firm intent. They are stimulating hostility where there should be co-operation. In the words of the hon. Gentleman, they are encouraging anarchy when there should be the rule of law. I must ask the House not to give leave for the Bill to be introduced.

Question put, pursuant to Standing Order No. 13 (Motions for leave to bring


in Bills and nomination of Select Committees at commencement of Public Business):—

The House divided: Ayes 203, Noes 228.

Division No. 287.]
AYES
[4.10 p.m.


Abse, Leo
Freeson, Reginald
Miller, Dr. M. S.


Albu, Austen
Gilbert, Dr. John
Milne, Edward


Allaun, Frank (Salford, E.)
Ginsburg, David (Dewsbury)
Mitchell, R. C. (S'hampton, Itchen)


Allen, Scholefield
Golding, John
Morgan, Elystan (Cardiganshire)


Archer, Peter (Rowley Regis)
Gordon Walker, Rt. Hn. P. C
Morris, Alfred (Wythenshawe)


Armstrong, Ernest
Gourlay, Harry
Morris, Charles R. (Openshaw)


Atkinson, Norman
Grant, George (Morpeth)
Mulley, Rt. Hn. Frederick


Bagier, Gordon A. T.
Grant, John D. (Islington, E.)
Murray, Ronald King


Barnett, Guy (Greenwich)
Griffiths, Eddie (Brightside)
Oakes, Gordon


Barnett, Joel (Heywood and Royton)
Griffiths, Will (Exchange)
O'Halloran, Michael


Baxter, William
Grimond, Rt. Hn. J.
O'Malley, Brian


Benn, Rt. Hn. Anthony Wedgwood
Hamilton, James (Bothwell)
Oram, Bert


Bennett, James (Glasgow, Bridgeton)
Hamilton, William (Fife, W.)
Orbach, Maurice


Bidwell, Sydney
Hamling, William
Oswald, Thomas


Blenkinsop, Arthur
Hardy, Peter
Owen, Dr. David (Plymouth, Sutton)


Boardman, H. (Leigh)
Harper, Joseph
Padley, Walter


Booth, Albert
Harrison, Walter (Wakefield)
Paget, R. T.


Bottomley, Rt. Hn. Arthur
Hattersley, Roy
Palmer, Arthur


Bradley, Tom
Healey, Rt. Hn. Denis
Pannell, Rt. Hn. Charles


Broughton, Sir Alfred
Heffer, Eric S.
Pardoe, John


Brown, Robert C. (N'c'tle-u-Tyne, W.)
Horam, John
Parry, Robert (Liverpool, Exchange)


Brown, Hugh D. (G'gow, Provan)
Houghton, Rt. Hn. Douglas
Pavitt, Laurie


Brown, Ronald (Shoreditch &amp; F'bury)
Huckfield, Leslie
Pentland, Norman


Buchanan, Richard (G'gow, Sp'burn)
Hughes, Mark (Durham)
Prentice, Rt. Hn. Reg.


Callaghan, Rt. Hn. James
Hughes, Robert (Aberdeen, N.)
Prescott, John


Carmichael, Neil
Hughes, Roy (Newport)
Price, J. T. (Westhoughton)


Carter, Ray (Birmingh'm, Northfield)
Hunter, Adam
Price, William (Rugby)


Carter-Jones, Lewis (Eccles)
Jeger, Mrs. Lena
Probert, Arthur


Clark, David (Colne Valley)
Jenkins, Rt. Hn. Roy (Stechford)
Rankin, John


Cocks, Michael (Bristol, S.)
John, Brynmor
Reed, D. (Sedgefield)


Cohen, Stanley
Johnson, James (K'ston-on-Hull, W.)
Rees, Merlyn (Leeds, S.)


Coleman, Donald
Johnson, Walter (Derby, S.)
Roberts,Rt.Hn.Goronwy (Caernarvon)


Concannon, J. D.
Johnston, Russell (Inverness)
Robertson, John (Paisley)


Corbet, Mrs. Freda
Jones, Barry (Flint, E.)
Rodgers, Wiliam (Stockton-on-Tees)


Cox, Thomas (Wandsworth, C.)
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Roper, John


Crawshaw, Richard
Judd, Frank
Ross, Rt. Hn. Wiliam (Kilmarnock)


Cronin, John
Kaufman, Gerald
Rowlands, Ted


Crosland, Rt. Hn. Anthony
Kelley, Richard
Sheldon, Robert (Ashton-under-Lyne)


Crossman, Rt. Hn. Richard
Kerr, Russell
Shore, Rt. Hn. Peter (Stepney)


Cunningham, G. (Islington, S.W.)
Lambie, David
Short,Rt.Hn.Edward (N'c'tle-u-Tyne)


Dalyell, Tam
Lamborn, Harry
Silkin, Rt. Hn. John (Deptford)


Darling, Rt. Hn. George
Lamond, James
Sillars, James


Davies, Denzil (Llanelly)
Latham, Arthur
Skinner, Dennis


Davis. Clinton (Hackney, C.)
Lawson, George
Small, William


Davis, Terry (Bromsgrove)
Leadbitter, Ted
Spearing, Nigel


Deakins, Eric
Lee, Rt. Hn. Frederick
Steel, David


de Freitas, Rt. Hn. Sir Geoffrey
Leonard, Dick
Stewart, Rt. Hn. Michael (Fulham)


Dell. Rt. Hn. Edmund
Lewis, Arthur (W. Ham, N.)
Strang, Gavin


Dempsey. James
Lewis, Ron (Carlisle)
Summerskill, Hn. Dr. Shirley


Doig, Peter
Lipton, Marcus
Tinn, James


Dormand, J. D.
Lomas, Kenneth
Torney, Tom


Douglas, Dick (Stirlingshire, E.)
Loughlin, Charles
Urwin, T. W.


Douglas-Mann, Bruce
Mabon, Dr. J. Dickson
Varley, Eric G.


Driberg, Tom
McCartney, Hugh
Wainwright, Edwin


Duffy, A. E. P.
Mackenzie, Gregor
Walden, Brian (B'm'ham, All Saints)


Dunnett, Jack
Mackie, John
Walker, Harold (Doncaster)


Eadie Alex
Mackintosh, John P.
Watkins, David


Edwards, Robet (Bilston)
Maclennan, Robert
Wellbeloved, James


Edwards, William (Merioneth)
McNamara, J. Kevin
Whitehead, Phillip


English, Michael
Mahon, Simon (Bootle)
Whitlock, William


Evans, Fred
Marks, Kenneth
Willey, Rt. Hn. Frederick


Ewing, Henry
Marquand, David
Williams, Alan (Swansea, W.)


Faulds, Andrew
Marsden, F.
Wilson, Alexander (Hamilton)


Fisher.Mrs.Doris(B'ham,Ladywood)
Marshall, Dr. Edmund
Woof, Robert


Fitch Alan (Wigan)
Mason, Rt. Hn. Roy



Fletcher, Raymond (Ilkeston)
Meacher, Michael
TELLERS FOR THE AYES:


Fletcher, Ted (Darlington)
Mellish, Rt. Hn. Robert
Mr. Alec Jones and


Foley, Maurice
Mendelson, John
Mr. Neil McBride.


Foot, Michael
Millan, Bruce



Forrester, John






NOES


Adley, Robert
Amery, Rt. Hn. Julian
Atkins, Humphrey


Alison, Michael (Barkston Ash)
Archer, Jeffrey (Louth)
Awdry, Daniel


Allason, James (Hemel Hempstead)
Astor, John
Baker, Kenneth (St. Marylebone)




Balniel, Rt. Hn. Lord
Gorst, John
Neave, Airey


Barber, Rt. Hn. Anthony
Gower, Raymond
Nicholls, Sir Harmar


Batsford, Brian
Grant, Anthony (Harrow, C.)
Noble, Rt. Hn. Michael


Beamish, Col. Sir Tufton
Gray, Hamish
Normanton, Tom


Bell, Ronald
Green, Alan
Nott, John


Bennett, Sir Frederic (Torquay)
Grylls, Michael
Onslow, Cranley


Benyon, W.
Gummer J. Selwyn
Oppenheim, Mrs. Sally


Berry, Hn. Anthony
Hall, Miss Joan (Keighley)
Owen, Idris (Stockport, N.)


Biffen, John
Hall, John (Wycombe)
Page, Rt. Hn. Graham


Biggs-Davison, John
Hamilton, Michael (Salisbury)
Peyton, Rt. Hn. John


Blaker, Peter
Harrison, Brian (Maldon)
Pink, R. Bonner


Boardman, Tom (Leicester, S.W.)
Hawkins, Paul
Powell, Rt. Hn. J. Enoch


Boscawen, Robert
Higgins, Terence L
Price, David (Eastleigh)


Bowden, Andrew
Hiley, Joseph
Proudfoot, Wilfred


Braine, Bernard
Hill, John E. B. (Norfolk. S.)
Pym, Rt. Hn. Francis


Bray, Ronald
Hill, James (Southampton, Test)
Quennell, Miss J. M.


Brewis, John
Holland, Philip
Raison, Timothy


Brinton, Sir Tatton
Hordern, Peter
Ramsden, Rt. Hn. James


Brocklebank-Fowler, Christopher
Howe, Hn. Sir Geoffrey (Reigate)
Redmond, Robert


Brown, Sir Edward (Bath)
Howell, Ralph (Norfolk, N.)
Reed, Laurance (Bolton, E.)


Bruce-Gardyne, J.
Hunt, John
Rees, Peter (Dover)


Bryan, Sir Paul
Hutchison, Michael Clark
Renton, Rt. Hn. Sir David


Buchanan-Smith, Alick(Angus,N&amp;M)
Irvine, Bryant Godman (Rye)
Ridley, Hn. Nicholas


Buck, Antony
James, David
Ridsdale, Julian


Bullus, Sir Eric
Jenkin, Patrick (Woodford)
Roberts, Wyn (Conway)


Burden, F. A.
Jennings, J. C. (Burton)
Rodgers, Sir John (Sevenoaks)


Campbell, Rt.Hn.G.(Moray&amp;Nairn)
Jessel, Toby
Rossi, Hugh (Hornsey)


Carlisle, Mark
Jones, Arthur (Northants, S.)
Russell, Sir Ronald


Carr, Rt. Hn. Robert
Jopling, Michael
St. John-Stevas, Norman


Cary, Sir Robert
Kaberry, Sir Donald
Scott-Hopkins, James


Chapman, Sydney
Kellett-Bowman, Mrs. Elaine
Sharples, Sir Richard


Chataway, Rt. Hn. Christopher
Kershaw, Anthony
Shaw, Michael (Sc'b'gh &amp; Whitby)


Chichester-Clark, R.
Kimball, Marcus
Shelton, William (Clapham)


Clark, William (Surrey, E.)
King, Evelyn (Dorset, S.)
Skeet, T. H. H.


Clarke, Kenneth (Rushcliffe)

Smith, Dudley (W'wick &amp; L'mington)


Clegg, Walter
King, Tom (Bridgwater)
Soref, Harold


Cockeram, Eric
Kinsey, J. R.
Speed, Keith


Cooke, Robert
Kirk, Peter
Spence, John


Coombs, Derek
Kitson, Timothy
Stainton, Keith


Cordle, John
Knox, David
Stanbrook, Ivor


Cormack, Patrick
Lambton, Lord
Stewart-Smith, Geoffrey (Belper)


Costain, A. P.
Lamont, Norman
Stoddart-Scott, Col. Sir M.


Critchley, Julian
Lane, David
Stokes, John


Crouch, David
Langford-Holt, Sir John
Tapsell, Peter


Crowder, F. P.
Le Marchant, Spencer
Taylor, Sir Charles (Eastbourne)


Dalkeith, Earl of
Lewis, Kenneth (Rutland)
Taylor,Edward M.(G'gow,Cathcart)


d'Avigdor-Goldsmid, Sir Henry
Lloyd, Ian (P'tsm'th, Langstone)
Taylor, Frank (Moss Side)


d'Avigdor-Goldsmid,Maj.-Gen.James
Longden, Gilbert
Taylor, Robert (Croydon, N.W.)


Deedes, Rt. Hn. W. F.
Loveridge, John
Tebbit, Norman


Digby, Simon Wingfield
Luce, R. N.
Temple, John M.


Dixon, Piers
MacArthur, Ian
Thomas, John Stradling (Monmouth)


Douglas-Home, Rt. Hn. Sir Alec
McCrindle, R. A.
Thomas, Rt. Hn. Peter (Hendon, S.)


du Cann, Rt. Hn. Edward
McLaren, Martin
Thompson, Sir Richard (Croydon, S.)


Dykes, Hugh
Macmillan,Rt.Hn.Maurice (Farnham)
Tilney, John


Eden, Rt. Hn. Sir John
McNair-Wilson, Michael
Trew, Peter


Edwards, Nicholas (Pembroke)
McNair-Wilson, Patrick (NewForest)
Tugendhat, Christopher


Elliot, Capt. Walter (Carshalton)
Madel, David
Turton, Rt. Hn. Sir Robin


Elliott, R. W. (N'c'tle-upon-Tyne,N.)
Marten, Neil
Vickers, Dame Joan


Emery, Peter
Mather, Carol
Walder, David (Clitheroe)


Eyre, Reginald
Mawby, Ray
Walker-Smith, Rt. Hn. Sir Derek


Farr, John
Maxwell-Hyslop, R. J.
Walters, Dennis


Fell, Anthony
Meyer, Sir Anthony
Ward, Dame Irene


Fenner, Mrs. Peggy
Mills, Peter (Torrington)
Warren, Kenneth


Fidler, Michael
Mitchell, Lt.-Col.C.(Aberdeenshire,W)
Weatherill, Bernard


Fisher, Nigel (Surbiton)
Moate, Roger
Wiggin, Jerry


Fookes, Miss Janet
Money, Ernle
Wilkinson, John


Fortescue, Tim
Monks, Mrs. Connie
Wolrige-Gordon, Patrick


Fowler, Norman
Monro, Hector
Woodhouse, Hn. Christopher


Fox, Marcus
Montgomery, Fergus
Worsley, Marcus


Fry, Peter
More, Jasper
Wylie, Rt. Hn. N. R.


Gibson-Watt, David
Morgan, Geraint (Denbigh)



Gilmour, Sir John (Fife, E.)
Morgan-Giles, Rear-Adm.
TELLERS FOR THE NOES:


Glyn, Dr. Alan
Morrison, Charles (Devizes)
Mr. Adam Butler and


Godber, Rt. Hn. J. B.
Mudd, David
Mr. John Page.


Goodhew, Victor
Murton, Oscar

Question accordingly negatived.

Orders of the Day — FINANCE BILL

As amended (in the Committee and in the Standing Committee), further considered.

Schedule 4

ZERO-RATING

4.19 p.m.

The Financial Secretary to the Treasury (Mr. Terence Higgins): I beg to move Amendment No. 50, in page 110, line 8, at end insert:
'or who, in the course of a business consisting wholly or mainly in the construction, alteration or demolition of buildings or civil engineering works, carries out the construction, alteration or demolition on land in which he owns a major interest'.
This is a purely technical Amendment. Its effect is to exclude from the scope of the zero-rating provision in item 2 of Group 7 construction and other services supplied by a sub-contractor to a builder whose supplies by freehold or long-lease of buildings he has constructed himself are zero-rated under item 1 of this Group.
It is intended, so as to minimise the number of zero-rated traders in the con-construction industry and generally, that the zero-rating of construction should apply at the final stage only; that is to say, to the client. Supplies of services and materials to a main contractor would be taxable at the standard rate and the supply by the main contractor would be zero-rated. Note (1) to Group 7 achieves this satisfactorily where a builder is constructing a building on a client's land. Any services supplied to the builder in that situation would be excluded from the scope of the zero-rate. As it stands, however, Note (1) excludes construction services only if they are supplied to someone who himself supplies such services as are mentioned in item 2. It would not exclude services supplied to a person who supplies a major interest in a building which he is constructing; for example, a speculative builder. Such supplies would be zero-rated.
The House will recall that yesterday we distinguished in another context a building built on the client's land and a building built on the builder's land. The Amendment corrects this anomaly so that

the supply of services to speculative builders is made taxable. This makes clear in law what people have assumed would be the position anyway.

Mr. Tam Dalyell: The matter is not clear to me because in "wholly or mainly in the construction" "mainly" can be construed in all sorts of ways. I have the impression that this is not as simple as the Treasury Bench made out. What did the Financial Secretary mean by the "final stage"? These points are perhaps nit-picking, but I gather from the building industry that there are complications which we had not understood. There is a great deal of open ground which affects the building industry, and there may be test cases. Is the Treasury certain that the matter is clear?

Mr. Higgins: By leave of the House, Mr. Deputy Speaker. We are now familiar with the helpful remarks on many occasions made by the hon. Member for West Lothian (Mr. Dalyell) in referring to this or that brief which he happens to have received. We are always in some difficulty when he appears to have received one of which we are not aware. This has been the case on one or two occasions in Committee.
Regarding "wholly or mainly", this is a fairly common form of words and one which arises in a number of pieces of legislation. The purpose of the Amendment is precisely as I have just outlined. It is a helpful Amendment. If it were not made we should have subcontractors who would need to know whether the builder for whom they were working would be supplying a freehold or long lease under item 1 or services under item 2 to know whether to charge tax on their supplies. That would be a somewhat difficult and ridiculous situation.
This is an adequate form of wording. I am not aware that we have received any representations about it. It seems to put forward the position clearly, improve the drafting and remove the anomaly. However, if the hon. Gentleman has a more technical point which he wishes to make we will gladly consider it. I have no reason to suppose that the Amendment is not as straightforward as I have sought to show it to be.

Mr. Dalyell: By leave of the House, Mr. Deputy Speaker. I had no representation on the "wholly or mainly" part. However, over the weekend there have been complaints from the building industry that these are complicated matters and that there is a great deal of open ground. This was a specific case of an over-generalisation.

Amendment agreed to.

The Minister of State, Treasury (Mr. John Nott): I beg to move Amendment No. 51, in page 110, line 17, at end insert 'or overseas resident'.
If it meets with the agreement of the House, we can also discuss Amendments Nos. 52 to 64.
These Government Amendments are designed to meet representations that the scope of the relief under the Group should be extended to give the maximum assistance to United Kingdom earnings from investment exports. The main effects of the Amendments are to extend zero-rating to services supplied to overseas residents, to widen the definition of "overseas trader" for the purposes of the Group, to give extended relief to services supplied to overseas authorities, to extend the order making powers for zero-rating exports of financial and insurance services, and to zero-rate the supply in the United Kingdom to an overseas trader of the transportation of imported and exported goods and ancillary services, such as handling and storage. Exports of goods are zero-rated under Clause 12(6), and exports of services should, in principle, also be zero-rated. The difficulty has been to identify them and to legislate for relief in a way that would not open a wide avenue for tax avoidance.
Since the Finance Bill was published there have been representations from a number of quarters that the scope of the relief did not go far enough to relieve investment earnings. The Amendments meet the representations that have been made on this varied matter, and I hope that they will be acceptable to the House.

Mr. Robert Sheldon: We welcome the assistance given for services being provided in Britain for the overseas trader, but there is a problem because we must not go too far and get the wording of the Amendments so loose that they provide loopholes in the tax system for the overseas trader.
Although I accept that the majority of the Amendments improve the drafting of the Bill and go some way to provide a more precise outline in which these services can be encouraged, there is one matter which I should like to clarify, namely, the position of an overseas trader who does not have a business in the United Kingdom nor an agency operating in the United Kingdom. Is such a trader able to advertise his articles in directories or on television without paying VAT?
I appreciate the difficulty of asking the Minister a question on the Floor of the House, but this is a serious point. The matter was referred to in Standing Committee. Clearly, it has been changed slightly as a result of these Amendments.

Mr. Nott: This point arises under Amendment No. 63. I will explain the position in this type of case. The hon. Gentleman referred to the case of an overseas trader who does not have a branch, a subsidiary or an agency in the United Kingdom, but nevertheless advertises in the United Kingdom. Amendment 63 makes a technical and consequential amendment to deal with that type of case. It would be wrong in principle—this was the point that the hon. Gentleman was making—and would leave scope for tax avoidance if advertising services in the United Kingdom were zero-rated when supplied to an overseas trader and used in the United Kingdom. Amendment 63 re-writes the original note 3 to the Group, to make it clear that these services will not be zero-rated where they are supplied to an overseas trader who is a person, or the agent or subsidiary of a person, who carries on a business in the United Kingdom, or is responsible or incorporated in the United Kingdom.
I think that answers the question. The hon. Gentleman did not mention the case of advertising in newspapers, but he mentioned television advertising. I think that I have answered his question, but if he is still unclear perhaps he would care to explain the difficulty.

4.30 p.m.

Mr. Sheldon: May I inquire the position of the firm selling in the United Kingdom? Would it be regarded as having a business just because it sold in the United Kingdom? Is that the Minister's interpretation of it? This is


is unclear. Under the old regulations I saw a loophole. I assumed that Amendment No. 63—Amendment No. 58 also refers to this—was an attempt to tighten up the wording. But, even though this may have been done, I am still not sure whether it tightens it up sufficiently. It would be a terrible thing if, as a result of the Amendment we were proposing to give a subsidy to those trying to import certain things into this country and to launch them in a way which has been very successfully applied on a number of occasions. It is clear that there should be no advantage to such firms.
I am not clear whether an overseas trader selling in this country, without an office or any residence here, can come under the heading of carrying on a business here. I am not clear whether sales without offices constitute a business.

Mr. A. P. Costain: As one of those who have made representations to the Treasury on this matter, I should like to thank my right hon. Friend the Chancellor for meeting a point. As the Minister of State did not specifically refer to it, I should mention that one of the problems for the civil engineering export business was the fact that in many under-developed countries, where company law is not very well defined, it has been expedient to form a company registered in this country for registration purposes only but not for operating purposes.
As I read Amendment No. 58, I feel that the Chancellor has met this point adequately, though not in a way which I should have thought expedient in the first instance.

Mr. Hugh Dykes: As one of the members of the Standing Committee who made representations on a number of points within the group of Amendments, I should like to express appreciation and thanks for the fact that the Chancellor has acceded to the representations made from many quarters on this subject.
Bearing in mind the importance of invisible earnings in the current account figures on the balance of payments, this concession and these Amendments will be received with enthusiasm by those who are contributing directly to the invisible

earnings of this country and those outside who regard this as very important for the country.

Mr. Nott: As I owe an answer to the hon. Member for Ashton-under-Lyne (Mr. Sheldon), with the leave of the House I shall try to answer his point.
If an overseas manufacturer, shall we say, has no place of business of any sort in the United Kingdom, he is not, therefore, a taxable person and, therefore, if he were to advertise goods upon the television before he brought goods into the country, as I think the hon. Gentleman was suggesting he might, there would be no way of collecting the tax on this individual.
I have answered the other point in the case of an office in this country. It is the distinction between someone who has no place of business or office here, in which case he is not a taxable person, and someone who has premises here. I believe that that answer meets the point.

Amendments made: No. 52, in page 110, line 19, after 'trader', insert 'or overseas resident'.

No. 53, in line 22, at end insert 'or an overseas authority'.

No. 54, in line 25, at end insert 'or an overseas authority'.

No. 55, in line 26, leave out from 'supply' to end of line.

No. 56, in line 31, after 'trader', insert 'or overseas resident'.

No. 57, in line 37, at end insert:
'8, The supply to an overseas trader of services consisting of the storage at or transport to or from a port or customs airport (within the meanings of the Customs and Excise Act 1952) of goods which respectively are to be exported or have been imported or of the handling or storage of such goods in connection with such transport'.

No. 58, in line 44, leave out from 'business' to end of line 2 on page 111 and insert:
'and has his place of business or principal place of business outside the United Kingdom'.

No. 59, in page 111, line 3, leave out 'State' and insert 'country'.

No. 60, in line 4, leave out 'State' and insert 'country'.

No. 61, in line 5, leave out 'State' and insert 'country'.

No. 62, in line 5, at end insert:
'(3) Overseas resident means a person who is not resident in the United Kingdom'.

No. 63, in page 111, leave out lines 6 to 9 and insert:
'(3) Items 3 and 4 do not apply where the overseas trader is a person, or the agent or subsidiary of a person, who carries on a business in the United Kingdom or is resident or (if a company) incorporated in the United Kingdom'.

No. 64, in page 111, line 10, leave out '5' and insert '3, 4'.—[Mr. Nott.]

Mr. Nott: I beg to move Amendment No. 65, in page 111, line 24, at end insert:
'3. The supply to and repair or maintenance for the Royal National Life-boat Institution of any lifeboat'.
The effect of this Government Amendment is to extend zero-rating to the supply, repair and maintenance of all lifeboats which are intended for use by the Royal National Lifeboat Institution. At present, lifeboats of a gross tonnage of 15 tons or more are zero-rated at item 1 of Group 9. The Amendment extends the zero-rating to the smaller RNLI lifeboats.
The Amendment results from the debate we had on the Floor of the House in Committee, and I promised then that we would consider this matter and discuss it with the RNLI. I am now glad to say that on the ground that this is a matter which concerns safety at sea the Government are able to make this Amendment clarifying the situation.

Dr. John Gilbert: I welcome the Amendment unreservedly and the generous way in which the Minister of State has acknowledged the contribution made to the Government's decision by the debate in Committee. In turn, I should like to acknowledge the part played in that debate by the hon. Member for Arundel and Shoreham (Mr. Luce), the hon. Member for Brighton, Kemptown (Mr. Bowden) and my hon. Friend the Member for Oldham, East (Mr. James Lamond).
I realise that one should not look a gift horse in the mouth, but the Amendment appears somewhat restrictive in so far as it relates only to the supply, repair and maintenance of any lifeboat. I see that the Amendment says "supply to". Is that wording intended to cover other

equipment used by the RNLI, such as shore equipment, equipment in lifeboats and the equipment of lifeboat men?
As the hon. Gentleman pointed out, he undertook on 11th May that he would consult the RNLI. Is the RNLI satisfied with the wording of the Amendment or did the institution seek for anything more generous than the Government have been able to grant? May we have some information about the representations made by the RNLI, which I assume were made? The hon. Gentleman did not specify whether there were consultations with the RNLI between the Committee stage and the Report stage, but I am sure that he will agree that there was an undertaking to have these consultations.
Subject to those questions, we should like to record our appreciation of what the Government have done. We hope that they will be as reasonable about various other Amendments which we shall press for very similar motives on various other points in the Bill. But this has shown that with a little consideration the Government can recognise the merits of our points.

Mr. Dalyell: I am one of those who pressed this case. I heard the Minister use the words "smaller boats". These presumably are those under 15 tons. I ought to declare a family interest in the work of the RNLI. We know that the new boats now are, thank heavens, over 15 tons. Am I right in thinking that these are covered
by Schedule 4 and that they are zero-rated anyway? I too, am interested in the question raised by my hon. Friend the Member for Dudley (Dr. Gilbert) about equipment, because I know that the RNLI is interested in this matter.

Mr. Nott: The larger boats are already covered in the Schedule. There never was a problem with them. The problem related only to boats under 15 tons. The Amendment puts all boats on the same basis.
The hon. Member for Dudley (Dr. Gilbert) asked about other items. On other items purchased by the RNLI there will be tax. The Amendment refers purely to boats; it extends no wider than that. I should make that clear.

Dr. Gilbert: Obviously, I have to be somewhat less warm in my encomium than I should otherwise be. Could the


hon. Gentleman give some idea of the relative proportions of RNLI expenditure going into boats and into other items of equipment?

Mr. Nott: I do not have the accounts of the RNLI to hand. I cannot answer that immediately, but, if the hon. Gentleman wishes me to, I shall be happy to make inquiries about the breakdown of the institution's purchases of different items and let him know.

Mr. Deputy Speaker: May I ask about the grouping of these Amendments? We had it in mind——

Dame Irene Ward: May I have a go on the lifeboats?

Mr. Nott: I shall give way to my hon. Friend in a moment. We had it in mind, Mr. Deputy Speaker, that Amendment No. 68 would be grouped with this Amendment, No. 65. May I say a few words on No. 65 at this stage and then move it formally later? I think that that would be for the convenience of the House.

Mr. Deputy Speaker (Sir Robert Grant-Ferris): Yes, if the House has no objection.

Mr. Nott: I am much obliged. Perhaps, before I explain the effect of Amendment No. 68, I should give way to my hon. Friend the Member for Tynemouth (Dame Irene Ward).

Dame Irene Ward: May we be told whether there have been conversations between the Royal National Lifeboat Institution and the Treasury? The hon. Member for Dudley (Dr. Gilbert) wanted to know, and so do I. My first public service was connected with the lifeboat organisation, a long time ago, and, coming from my part of the country, I take a great interest in what goes on.
Sometimes even the nicest of Treasury Ministers, Chancellors and what-not overlook the fact that it is extremely important to those who work voluntarily in the lifeboat organisations to know that their case has been put, that they have had their say, and then—gratifyingly in this case—that it has been accepted. I want to know whether conversations took place, and whether the Royal National

Lifeboat Institution is as pleased with the Treasury as we appear to be. It is no good us appearing pleased with the Treasury if the institution still has comments to make.

Mr. Dalyell: Could I have a "mini-go", too, since this concerns the building of boats and what goes in them? It will be no news to the Minister that the equipment inside the boats is a matter of concern to the RNLI. In a sense, this question is analagous to the old familiar question of the cooker and the bathroom fittings which we discussed yesterday. Are the fittings in the boat, which take a significant part of the cost of any boat, under or 15 tons to be zero-rated?

Mr. Nott: If I may have the leave of the House to speak again, I have already answered the question just raised by the hon. Member for West Lothian (Mr. Dalyell) about items bought by the RNLI which it may put into its boats.
Supplies which the institution buys in will, in the vast majority of cases, be tax-inclusive. The institution will be able to deduct the input tax. This Amendment refers purely to boats, to the actual lifeboats themselves.
I do not wish to swap lifeboats with my hon. Friend the Member for Tynemouth (Dame Irene Ward), but I think she knows that I have more lifeboats in my constituency than there are in any other constituency in the United Kingdom. I have five lifeboats in my constituency, and I am very proud of them. They do a remarkable job, and the fine voluntary organisation of the RNLI performs a great public service—both the voluntary crews and the many thousands of people who collect funds for the lifeboat service.
When we discussed this matter earlier, I undertook that we should have further discussions with the RNLI. There have been these further discussions between the Cusoms and the institution. We obtained the institution's agreement to this Amendment before we tabled it.

Dame Irene Ward: Thank you.

4.45 p.m.

Mr. Andrew Bowden: As one of the coastal Members who raised this matter with my hon. Friend the Minister of State, with support


from both sides—and speaking now as an honorary member of the Brighton lifeguard station as a result of the speech which I then made—I must tell my hon. Friend that I am disappointed to hear that some of the equipment for lifeboats is still likely to be subject to value added tax.
What about equipment which will be standard fittings as part of the boats—oars, rescue ropes, lifebelts and things of that kind? Will those items be excluded from VAT, and may we take it that the tax will apply only to equipment specifically bought such as Very pistols and one or two other additional items? If it is just to apply to things such as Very pistols that is all right, but it will be most regrettable if the institution still has to pay VAT on standard fittings when the craft as a whole is purchased.

Mr. Nott: If I may have leave to speak again, a large proportion of the items which the RNLI buys will be tax-inclusive. For example, if it goes out and purchases rope, the rope will be bought tax-inclusive. If it buys a boat and as part of the standard equipment of that boat there are certain items in it, that standard equipment of the boat will come under the Amendment.
I wish to correct something I said earlier. I referred to input tax, but that would not be relevant here because the RNLI, as a charity, is not regarded as being in business. I apologise for the error. The main point I was making about buying in certain goods tax-inclusive was none the less correct.
I come now to Amendment No. 68, in page 111, line 45, at end insert:
'(2) The supply of any ship or aircraft includes the supply of any services under a charter of the ship or aircraft.
(3) "Lifeboat" includes any ship used as a lifeboat'.
The effect is to zero-rate ship and aircraft chartering. In some common forms of charter of ships and aircraft, where the owner normally retains control of the ship or aircraft, the owner has been treated under case law as providing a service and not a supply of goods. As the Bill is at present drafted, these forms of charter would accordingly be taxable. The Amendment is designed to extend zero-rating to these forms of charter as well.
I hope that that explanation satisfies the House, so that I may move Amendment No. 68 formally when we come to it.

Amendment agreed to.

Mr. Joel Barnett: I beg to move Amendment No. 66, in page 111, line 29, at end insert:
'(d) in a licensed hackney carriage or other vehicle licensed for the transport of passengers by a local authority'.
Schedule 4 zero-rates transport where the vehicles carry not fewer than 12 passengers. We are seeking by the Amendment to zero-rate taxis or other hire cars if registered by a local authority. I envisaged that there could be other vehicles, apart from hackney carriages, zero-rated in this way, and this might well provide an opportunity for greater control over car hire.
If the Amendment is not accepted, there will be several anomalies and problems. Indeed, as the hon. Member for Folkestone and Hythe (Mr. Costain) said yesterday, we shall have "a proper hubble-bubble". For example, what is to happen in the case of an owner-driver taxi business. The driver will presumably be exempt on the ground that he does not take gross fees of more than £5,000 a year. I do not know how many owner drivers take less than £5,000 a year but I imagine that the Chief Secretary will have looked at their income tax returns and found that all of them take less than £5,000 a year. But, in view of the expense of running a cab, the depreciation and, in some cases, the contribution towards being a member of a pool and having a radio service, the running costs are likely to be substantial. It is possible that the returns submitted by taxi drivers indicate that their gross earnings are less than £5,000, and let us assume that that is the case and that inflation will not ensure that their earnings will rise above that figure.
One group of taxis will be exempt from value added tax but a chain of taxis with total earnings of more than £5,000 a year will be subject to VAT. It seems that the public will have the difficult task at times not only of finding a taxi but of finding one which does not have to pay VAT. Presumably we shall have to ask the taxi driver when he stops whether he is in a


chain or whether he is on his own and whether he is going to charge VAT.

Mr. Dalyell: Can my hon. Friend indicate what kind of answer he might get?

Mr. Barnett: I was coming to that. Thereis another problem. If a man is travelling on business and uses the taxi, the money he spends will be an allowable input and he will want a receipt from the taxi driver. It is possible to devise a system whereby the driver will give the man a proper tax invoice of the kind we discussed in the Standing Committee which will have the taxi's registration number, the amount of the charge on the meter, and the tax on the charge.
What happens about the meters? Will the meters be calibrated differently in cabs subject to VAT? Or will there be a simple surcharge, the meters not being altered. We can imagine the effect on public relations of someone using a taxi who does not often use that form of transport, someone up from the country or from abroad. What happens if he takes a cab in London which is "owner-occupied" and free from VAT, and later he takes another cab which is subject to VAT because it is one of a group. One can imagine the difficulties which will arise.
Again, how on earth is the Customs and Excise to decide which taxi drivers are exempt and for how long? We shall be back to the situation in the fish and chip shops. There will be spot checks. One can imagine the driver's reaction when the inspector stops him and asks "What is your turnover, mate?" The driver's reply is unlikely to be printable, but very interesting none the less. So, we have hardly started on this reform when we see a tax bristling with difficulties. I would be glad to hear how the Chief Secretary envisages dealing with just a few of these.

Mr. Gordon Oakes: I support fully what my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett), said. The Government have wisely decided to exempt transport from the effects of VAT. But taxis, a form of transport just like any other, are not exempt. Presumably the Government's thinking is that travel by taxi is a luxury

means of locomotion that is different from travel by bus or train. But for many people it is essential that they travel by taxi. It is a mistake to think always in terms of the London taxi. In many rural areas it is impossible to get a bus, and people are forced to pay the extra cost of travelling by taxi. In addition, these people are to be further penalised by 10 per cent. VAT on their bill.
Many other people who are invalids and cannot travel by public transport must travel by taxi. In my constituency, for example, many elderly people take the taxi to church even though there is a bus service. They are disabled in some way and they are unable to wait for buses or get on or get off them. Are they to be penalised because they are disabled? There is no rhyme or reason in penalising one form of public transport against all others.
My hon. Friend mentioned the anomalies which will arise between the owner-driver who will be exempt from VAT and the member of a chain of taxis who will have to pay the tax. One can imagine endless rows which will take place between the passenger and the cab driver at the end of the journey about whether the man is or is not subject to VAT.
One of the great beauties of our British taxis is that they operate with uniform scales of charge. If a person travels in a taxi he knows that he will pay the same fare to cover the same distance in the same period in a licenced hackney carriage. That fact eliminated a lot of arguments. But those arguments will now return because of the tax.
The taxi drivers in this country are very concerned and alarmed by the number of fly-by-night operators, who after working all day at their normal job spend their evenings or weekends picking up extra money and operating as a taxi without a licence. Often the drivers do not have insurance cover for their passengers. They undercut legal taxis, and because of VAT they will be able to undercut them even more.
We should do everything possible to eliminate that kind of enterprise by unqualified taxi drivers who are often not insured and often pay no tax on their earnings, unlike the legitimate taxi


driver. The gap is widened yet again because the legitimate driver or his passengers will have to pay an extra 10 per cent. on top of the fare. It is quite anomalous that one kind of transport should be subject to the tax, and I hope that the Government will see the force of my hon. Friends argument and exempt or zero-rate taxi cabs.

5.0 p.m.

Mr. Bowden: I am surprised to find myself in general agreement with the comments of the hon. Member for Hey-wood and Royton (Mr. Joel Barnett). There is no question but that taxis are an integral part of the transport system. If we discourage people from using them at certain times, that must mean that they will use their cars more, which cannot help the problem in towns like my own and many other parts of the country.
I apologise for quoting the example of my own town, but that is the one I know so well. After 11 o'clock at night in Brighton there are very few buses, and taxis become a vital part of the transport system. One of the conditions of a licence in Brighton is that the taxis must meet the trains from London until the last train has arrived at Brighton station, which is normally between 12.55 a.m. and 1.15 a.m.
If taxi charges have to bear VAT, I can see a number of unpleasant things happening. I can see a disastrous effect upon tips given to individual taxi drivers. I do not like the tipping system, but it exists. I am told by my local taxi cab association that most drivers probably earn about £300 a year in tips. Surely the House can see the effect the tax would have upon tipping. When the driver tells the passenger "The fare is X pence, and, by the way, there is an extra 10 per cent. for value added tax", in many cases the driver will receive no tip or a substantially reduced amount. The drivers will then tell the owners that they must have a higher basic rate of pay, because they are losing a substantial proportion of the tips which they must regard as part of their overall income. Therefore, fares will again have to go up. Taxi cab associations know that when fares are increased some passengers are inevitably lost, which means that there is a vicious circle. Passengers are driven away. They will look for alternative forms of transport,

and in nine cases out of 10 they will have their private cars on the road more frequently.
I hope that my hon. Friend the Chief Secretary will consider these points. It would be very unwise to apply value added tax to taxis, and I hope that he will favourably consider the Amendment.

Mr. Ray Carter: If the debate had taken place at noon today I am sure I should have supported the Amendment, but, unfortunately, I suffered rather a tragic experience at lunchtime, which gives me cause for some doubt.
I called for a taxi at the Members' entrance at lunchtime because I had a luncheon appointment. I asked the driver to take me to 29, King Street, whereupon he took me to King Street in the City. I asked him to wait while I checked the address, and discovered that 29, King Street was a Post Office. Clearly, that was not the place that I wanted.
The taxi driver said that the only other King Street he knew was in Covent Garden. My journey to the City had cost 54p. He assured me that it would take only five minutes to get to Covent Garden, and that the cost would be little extra. However, it was rather more than I thought. Again I checked when we arrived in King Street, Covent Garden, and found that No. 29 was not where the British Aerospace Companies was located.
We then had to try to discover a third King Street. The driver could only think of a King Street in Hammersmith, and I was sure that that was not the place where the British Aerospace Companies would reside. We eventually decided that it would be in St. James's, and sure enough it was. We had tried the only three King Streets in the whole of central London. In order to get me there, my taxi driver described the circuitous route of all three only to drop me at the last, landing me with a bill of about £1. I suppose that other taxi drivers might have taken me straight there. The journey took me three-quarters of an hour. Therefore, the only reason I can find in favour of the Amendment is that if it is not accepted such a journey would cost £1·10.

Mr. Bowden: Would it not have been wiser if the hon. Gentleman had made sure that he knew the postal code area of


the King Street he wanted to go to before getting into the taxi?

Mr. Carter: That is a point, but when someone is in the kind of hurry I was in he trusts the taxi driver to take him straight away to the address. I suppose we expect an awful lot of our taxi drivers.

Mr. Oakes: The House would no doubt be interested to know what tip my hon. Friend gave the driver.

Mr. Carter: My hon. Friend will be surprised to know that in spite of that experience I still tipped the man. I suffer from the common British disease of not having the courage to walk away from someone who normally receives a tip, whether a waitress, barber, cab driver or anyone else, without giving a tip.
I see that Mr. Deputy Speaker is becoming a little edgy. I suspect that he feels that I am wandering away from the Amendment. But the story I have told is relevant because it describes what we expect of a taxi driver. The taxi is not simply a means of transport. We expect the driver to be able to get expectant mothers to hospital on time and obscurantist Members of Parliament to addresses the whereabouts of which they do not know. Therefore, taxis should be classified in the same way as every other form of transport. I ask the Government to listen patiently, and in the end rewardingly, to the arguments of my hon. Friends, and to agree that it would be entirely wrong to impose VAT on taxi fares.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin): I hope that I shall always listen patiently to any case made by hon. Members on either side, whatever the trials and tribulations they may individually have suffered at the hands of the London taxi driver.
The question of the application of value added tax to taxi fares was raised briefly in Committee, I think by the hon. Member for Ilkeston(Mr. Raymond Fletcher). I am glad that we have had a chance to return to the subject, because it affects many tens of thousands of people. In Committee my response was that we should be happy to receive any representations. It will not surprise the House to learn that we have had quite a

number. A number of hon. Members on both sides have been approached by the taxi and car-hire trades, and some of the anxieties expressed have been reflected in the speeches from both sides this afternoon.
Passenger transport is zero-rated under the Bill, provided it takes place
in any vehicle, ship or aircraft designed or adapted to carry not less than twelve passengers".
That zero-rating therefore covers virtually the whole of fare-paying passenger transport, leaving, among road vehicles, only taxis and private car hire nominally within the charge to tax.
The effect of the Amendment would be to extend the zero-rating of passenger transport to the hiring of all licensed taxis and to private hire cars licensed by local authorities. If the Amendment were accepted, the only car hire charges which would be subject to tax would be charges for unlicensed hire cars.
We decided to zero-rate passenger fares because we were persuaded that if VAT were applied it could undermine the viability of the passenger transport industries, which could only have the effect of accelerating the decline of public transport which the Government are making very great efforts in other directions to prevent. Many sectors of public transport already receive grants and subsidies either from the Government or from local authorities. Furthermore, we were persuaded that passenger fares enter substantially into the budgets of many ordinary families, and it seemed to us right, in line with the treatment of food, fuel and housing, that such fares should be relieved of tax.
The question to which the House must address itself is whether the logic of those arguments applies to taxi fares and charges paid for private car hire. We concluded, after careful study, that it did not, and, as I said in Committee, it is the Government's intention that taxi fares should be subject to the tax; and the same applies to car hire charges. These activities are profitable. They do not depend on support from public funds. The costs do not enter to any significant extent into the budgets of the less well-off members of the community, and it seems to us that there are no economic or social arguments for relieving them from VAT.
I take the point of the hon. Member for Widnes (Mr. Oakes) that from time to time, perhaps even regularly, some people with very limited incomes—the disabled, and so on—use taxis. But I am sure that he will agree that they represent a very small proportion of the total number of users of taxis and hire cars.

Mr. Bowden: There are many local authority housing estates in my constituency, on the borders of Brighton, where a large number of people regularly use taxis because the bus service is not adequate and, after a certain time at night, there are no buses to the estates. It is not true to say that taxis are not used by a wide range of people in different income groups, because they are.

Mr. Jenkin: I entirely accept what my hon. Friend says about his constituency, but, unlike rents, food and the other items of family expenditure which we have zero-rated, taxi fares and car hire do not in general represent a significant share of the expenditure of families with very limited means.
But that is not the argument which the trade has put forward. It has not sought to justify exemption or zero-rating on the grounds put forward by my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) and the hon. Member for Widnes. The first argument put to us by the trade, which has not found expression in the House today, is that purchase tax never applied to London-type taxis and therefore they should not be subject to VAT and the taxi fares should be zero-rated.
I can give the House a complete assurance. The treatment which we propose for
the London-type taxi maintains under the new regime the substance of the existing arrangement. We have already stated that we propose to make an order under Clause 3(6) under which the tax paid on the purchase of business cars would not be allowed as a credit against output tax. We propose that the order should apply to all vehicles used as taxis, except the London-type taxi. Furthermore, all vehicles, again except the London-type taxi, will be subject to the car tax. Thus, the position in respect of taxis will be similar to that under purchase tax—that is, that vehicles used in the trade will effectively bear tax, except for the Lon-

don-type taxi. Perhaps I need not dwell further on that argument.

Mr. Joel Barnett: The Chief Secretary will be aware that in many parts of the country, and certainly in the North-West, although not in the main towns such as Manchester, there are taxis which are not hackney carriages. Will they have the same concession?

5.15 p.m.

Mr. Jenkin: The treatment which has applied hitherto applies to what I have described and what is known in the trade as the London-type taxi. The rationale for this—and it is not unreasonable—is that as purpose-designed vehicles, different from the ordinary run of passenger cars, they are several hundreds of pounds more expensive than the kind of vehicle which might otherwise be used. One can justify separate taxation treatment of the vehicle on these grounds.
The next argument—and this was the argument of the hon. Member for Hey-wood and Royton (Mr. Joel Barnett), and the trade has laid a lot more stress on it—was that the tax should not apply on broadly administrative grounds and grounds of practicability. It is argued that it will be impracticable to collect VAT on taxi fares and car hire charges and therefore the Government's intention to charge it on these services will be effectively frustrated.
We must maintain the clear distinction between what might happen in principle and what we expect to happen in practice. In principle, taxi fares will be taxable and any tax paid by a taxable trader can be deducted under the normal credit mechanism. VAT on taxi fares would thus effectively be borne only on hirings by individuals. But in practice—and the hon. Member for Heywood and Royton recognises this—the £5,000 exemption limit materially affects the position.
I draw the House's attention to the predominant characteristic of the taxi and car hire trade, namely, that a very large number of taxi operators are self-employed, and the overwhelming number of the self-employed operators have a turnover below the £5,000 exemption limit. Consequently, they will be exempt. They will not charge VAT on their fares. I realise that there will be some input tax—a hidden tax on their input.

Mr. Joel Barnett: Will the tips be included as takings when considering the £5,000 exemption limit? I am perhaps being over-suspicious, but, judging from my experience of tipping taxi drivers, I doubt very much whether they are 10 per cent. of the gross fees.

Mr. Jenkin: Tips are not part of the taxable turnover in this sense. They are in addition. They come into charge for income tax as they are part of the taxi driver's income. But that is a different matter.

Mr. Carter: In London, whether it is a taxi owned and run by someone who is the sole owner of it or a fleet of taxis which are owned by one company, they all charge the same fare. Therefore, the terms of trade between all sections of the London cab trade are the same. Will there be competition between the major company owning 200 or 300 cabs, or possibly more in central London, and the man who owns a taxi and has a turnover of under £5,000 a year and who therefore will be able to charge a lower fare? Will an element of competition which has not previously existed be introduced in the trade?

Mr. Jenkin: Perhaps the hon. Gentleman will allow me to develop the argument. I am conscious of that point, and I will deal with it.
We are basically dealing with three kinds of taxi operator. First, there is the London taxi service. Practically all taxi operators in London are either owner-drivers or journeymen drivers who will be treated as self-employed and thus eligible for exemption. Secondly, there are the provincial taxi services, and again most of the operators are owner-drivers, although a few of them are journeymen drivers. There are some larger companies who operate with employed drivers, and these companies, whose turnover will probably exceed £5,000, will be registrable and will charge tax on their fares. Thirdly, there is the car hire, which covers the whole spectrum from the part-time self-employed driver through to the major car hire operators, such as Hertz, Avis and so on.

Mr. Bowden: There are a large number of owner-drivers in many parts of the country who, by themselves, do not reach

the £5,000 turnover a year. For eight hours of the day those owner-drivers may drive their cabs. Another person, self-employed, may then drive that cab for another eight hours, thus ensuring that the capital item, the cab, is used most effectively. What is the position then?

Mr. Jenkin: Each driver of the car in those circumstances would be regarded as a separate trader. If the second driver was the employee of the first driver different considerations would apply. It would be one business and the turnover of the two would have to be aggregated.
If what I have said is right—and I believe it to be right because, naturally, Customs and Excise have had full discussions with the trade—the House will recognise that the great majority of taxi and car hire operators will be below the exemption limit, and that effectively disposes of the administrative argument. They will not have to keep records, they will not have to charge VAT and they will not be entitled to any offset of input tax.
If the Amendment were accepted, and the taxi and car hire operators were zero-rated, then every single one of them would have to maintain full VAT records so as to be able to claim back tax on their inputs, and I find it difficult to believe that they would welcome this. The advantage of exemption is that, they being outside the tax net, there are none of the administrative problems which hon. Gentlemen would be the first to seek to magnify.

Mr. Oakes: On the question of the two types of drivers, those who will be paying VAT and those who will not, will the Minister have a word with his right hon. Friend the Home Secretary on meters, so that the public may know from the meter whether or not they are liable to pay the tax and so avoid arguments?

Mr. Jenkin: I am coming to that. I do not think that is the right solution, but I am conscious of the point.
For the larger firms, those that are within the charge, we see no difficulty whatever in administering the tax. They will be in exactly the same position as any other retailer selling taxable goods or services. They will not normally give a tax invoice, although any user who is


a taxable trader and who wishes to claim tax as an input can ask for an invoice in the ordinary way. At first sight, it does not seem as though the problem of applying VAT to these traders are anything like as difficult as has been represented. Nevertheless, the trade has advanced two further points with which I must deal.
First, there is the point mentioned by the hon. Members for Birmingham, Northfield (Mr. Carter) and Widnes, that some taxi fares will be charged while some are exempt. It is said that that is unfair discrimination. Even where there is this difference, where the larger firms will be within the charge to VAT, the vast majority of customers will normally be quoted a tax inclusive price. Therefore, there will be no question of argument about adding 10 per cent. to the hire price at the end of the journey. It is a matter of complete irrelevance to the vast majority of taxi users whether or not their taxi is within that charge, just as it is quite irrelevant to the shopper calling at an exempt shop or a taxable shop. The price charged will be the same. The only difference—and the passenger does not need to concern himself with this—is whether the tax is being charged on the total turnover of the business in the ordinary way. That problem is no different from that which applies in other trades where some traders are below the exemption limit and some above it.
I recognise that car hire charges are competitive, but that of itself does not seem to be a reason to warrant zero-rating the whole industry. A large firm can make substantial economies on the purchase of spares, on the maintenance of vehicles and in many other ways which are not always open to the owner-driver, and that is why one can justify the exemption limit for the small man while charging the larger trader.
Then there is the problem of the hidden tax on the inputs of exempt taxi drivers. To the extent that this hidden tax is not absorbed it can be recouped only by an increase in fares. I recognise the point made by the hon. Member for Widnes that the adjustment of taxi meters is not a small matter. It will have to be spread over many months, but in the meantime, as we know from experience, the fares can be adjusted in accordance with a

notice displayed in the cab. Our calculations suggest that the recoupment of the hidden tax might perhaps be done by a small increase possibly confined to the initial flag-drop hiring charge, with no extra charge at subsequent stages.
I must make clear that the method and amount of any adjustment are matters for consideration by my right hon. Friend the Secretary of State for Home Affairs and for local authorities which are licensing authorities. I recognise that the burden of the hidden tax will not be identical between one taxi driver and another, but from information we have been given, it does not seem that discrepancies are likely to be so wide as to amount to serious distortion of trade.
All in all, therefore, despite the representations that have been made and the discussions we have held—and I have listened carefully to the points made on both sides of the House—I believe it is still right not to include these trades in Group 9 of Schedule 4, that is to say, not to zero-rate them. Here I am reinforced by the practice on the Continent. In Belgium, Holland, France and Luxembourg, taxi fares and car hire charges are within the VAT charge, and rates range from 4 per cent. in Holland to 17·6 per cent. in France. Our 10 per cent. charge where it applies is not out of line. In Norway, Sweden and Denmark taxi fares are exempt, but car hire firms are taxed.
Under the arrangements we propose which I have outlined to the House, the great majority of taxi fares will be exempt because the operators will be below the exemption limit. The remainder, including the larger car hire fares, will be taxed, but again the rate is squarely within the range of tax rates on the Continent. I honestly believe that this is the right treatment for this form of service, and I hope that I have said enough to indicate that we are on sound ground in advising the House to reject the Amendment.

Mr. William Clark: The more I hear of this debate the more concerned I am about the administrative complications which will result. My hon. Friend knows that I am not for narrowing the tax base, but I will not rehearse those arguments again. My hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) raised the question of the


taxi which is shared between two individuals. If an individual owns a taxi and runs it for eight hours, the total takings will be under the exemption limit and no VAT is paid. If he lends that taxi to his friend and his friend runs it for eight hours, what about the £5,000 exemption limit? Let us assume that they bought the taxi between them and are in partnership——

Mr. Patrick Jenkin: If they are two separate traders, each being self-employed, the fact that they happen to use the same taxi would for this purpose be irrelevant. Each would be entitled to a separate £5,000 exemption limit.

Mr. Clark: That is an extraordinary extension of the income tax law. If two people own a taxi between them, under the tax law, I understand, that is considered to be a partnership. In a partnership the total takings are computed and the partners are liable to income tax, one, say, at 40 per cent. and the other at 60 per cent., and so on. There will be administrative complications here.
A person who uses a taxi for business purposes would get a tax invoice which could be used as a tax input credit. That is splendid, provided he picks a taxi that is subject to VAT. If a taxi driver is exempt, he is not able to give a tax invoice certificate.
The complication of having two sets of taxi fares is that if the fleet taxi-owner has to charge his 10 per cent., he will get his input tax credit and so on. That fleet taxi-owner must pay 10 per cent. on gross turnover, which will not be a small amount. Therefore, if London is to have common taxi fares, the self-employed person who is not paying VAT will be a much more viable proposition.
I ask my hon. Friend to look again at this matter since I feel that the Customs and Excise authorities are making a rod for their own back. The administrative complications will be immense, and I do not think the Customs and Excise Department will overcome them.

5.30 p.m.

Mr. Dalyell: There is in this debate a good deal of material for a comic opera. One can imagine the kind of conversation that might take place between the would-be passenger and various taxi owners.

The House of Commons is not a place for ribaldry or bad language, and I will not go into those conversations, but we can all imagine many of the situations.
An even worse prospect is that people will try to get round the law. Taxi drivers are inventive, quick people and it will not belong before they change their status. There is no doubt that suddenly overnight many of those drivers who hitherto have belonged to large firms will become individual units and will alter their status according to the tax advantage.
I believe there should be a stay-put operation by the Treasury and that they should think again about this matter. I believe that on this occasion they have been found out.

Dame Irene Ward: I do not want to become involved in all these taxi arrangements. I like taxi drivers very much indeed, whether they are employed by
big companies or small ones. As a rule I find they become great personal friends.
I believe the Treasury does not know enough about taxi drivers to pontificate in the sort of way the Chief Secretary has done this afternoon. I am a member of a Select Committee which is investigating in depth all the transport arrangements, whether they involve taxis, car hire, ships, buses or whatever it may be. We have been engaged on our investigations for many months. Would not my hon. Friend the Chief Secretary be better advised to wait for the report of that all-party Committee before taking any firm steps on this subject?
The Chief Secretary has spoken about the situation in Newcastle. I know that he has been to see us once, and we should be delighted to see him again, but I believe he has the whole situation wrong. In our part of the world we have responsible taxi firms which are decent enough to allow a certain number of independent taxi drivers to stand in the station alongside the other firms so that they may have a fair share of the business. When the hon. Gentleman begins to speak about arrangements in Newcastle, about which he knows nothing, I feel he would be better advised to ask people who live in Newcastle about the taxi situation there. He would have had a much better understanding of our difficulties.
The Treasury has had only a short time to investigate all the complications of the subject. There are occasions when somebody on the Treasury bench says, "Let us wait and see what happens". I suggest that this is one of those occasions. Therefore, I emphasise that they should await the Select Committee's report before attempting to pontificate on these very complicated matters. They would then know a little more about the problems of using car hire services in rural districts and the problems faced by people living on small incomes who have to pay these car hire charges. I wish that I had not had to sit here to listen to many things said by my hon. Friend, because they do not bear out the facts as we have found them in our investigations in the Select Committee.

Mr. Joel Barnett: Anybody who has listened to this brief debate will be satisfied that the Chief Secretary has failed to deal with the problems and anomalies which have been pointed out to him. The hon. Member for Tynemouth (Dame Irene Ward) was quite right, though I would not have chosen the title of "the great pontificator" for the hon. Gentleman. It is the hon. Lady's description, and I am sure the hon. Gentleman took it with his usual good humour.
Many of my hon. Friends, and indeed hon. Gentlemen opposite, have emphasised the anomalies which will occur, but they were not dealt with in the Government's reply. The Chief Secretary thought that it might be possible for taxis in groups to start a journey with the flag down.

Mr. Patrick Jenkin: Perhaps I may intervene to clarify this matter. On any taxi with a meter, the fare is split into two parts. There is the flag drop charge, the first amount that goes on when the flag goes down, and then there are the charges which are made stage by stage in the journey. I am suggesting that such calculations as the Customs have been able to make suggest that a very small increase in the flag drop charge will be sufficient to cover the hidden tax in the case of exempt taxi drivers. That is all I am saying.

Mr. Barnett: That only emphasises how difficult the situation will become. There was an intervention in this debate by the hon. Member for Surrey, East (Mr. William Clark)—an hon. Gentleman who

loves this tax almost as much as does the Financial Secretary—and even he found it impossible to understand how the Government will operate this tax. He could not understand what would happen when new businesses were created; nor could he understand how one taxi which was run
by two people would not constitute a partnership. I believe I followed what the Chief Secretary was saying on that point, namely that they are two separate people running two separate businesses in one taxi. It is all a little involved. If one of the two people was the employer and the other the employee, then from what the Chief Secretary was saying one understands that that would be regarded as one business, which would pay the tax. The whole scheme is crazy.
I do not want to take it any further. It is obvious. It is only a pity that every hon. Member of this House did not hear the debate. If everyone had heard it, I have no doubt that this Amendment would be carried. For the moment I shall press those hon. Members on both sides who are present to show their feelings about it, because we on this side of the House intend to press the Amendment to a Division.

Mr. Patrick Jenkin: I honestly believe that the administrative difficulties which hon. Members have raised are greatly exaggerated. Obviously it would be wrong to lay too much emphasis on the position in London. But it is a fact that some 98 per cent. of London taxi drivers will be below the £5,000 exemption limit and, therefore, will be exempt from VAT. They will not be concerned with VAT except to the extent that there is some element of hidden tax on their inputs——

Mr. Robert Cooke: What about the case of six noble Lords who are running the same stately home and who each do one-sixth of the work?

Mr. Jenkin: I was about to come to the point raised by my hon. Friend the Member for Surrey, East (Mr. William Clark). I appreciate that there may be special arrangements with some taxis. In every case, it must be a question of fact whether there is a partnership—that is to say a single taxable business—or whether two separate people use the taxi 12 hours each in the 24. That is a question of fact and it is one that has to be


decided for other purposes, including for income tax. I do not see that this will give rise to serious difficulties.
The point that I urge on the House is that this is a broadly-based tax on consumption. The arguments which applied to
public transport both from the point of view
of the incomes of those at the lower end of the income scale and from that of the viability of the transport undertaking do not apply to taxis and car hire firms. I believe that we are right to say that with a broadly-based tax this

kind of consumer expenditure ought to be within the charge to tax. Nevertheless, as the tax operates we shall want to see how it is working. This is a natural and normal function of any Treasury Minister with a new tax.

I hope that the House will feel it right to reject the Amendment.

Question put, That the Amendment be made: —

The House divided: Ayes 213, Noes 238.1625

Division No. 288.]
AYES
[5.43 p.m.


Albu, Austen
Ewing, Harry
Mabon, Dr. J. Dickson


Allaun, Frank (Salford, E.)
Faulds, Andrew
McBride, Neil


Allen, Scholefield
Fisher,Mrs. Dorls(B'ham,Ladywood)
McCartney, Hugh


Archer, Peter (Rowley Regis)
Fitch, Alan (Wigan)
McGuire, Michael


Armstrong, Ernest
Fletcher, Raymond (Ilkeston)
Mackenzie, Gregor


Atkinson, Norman
Fletcher Ted (Darlington)
Mackintosh, John P.


Barnett, Guy (Greenwich)
Foley, Maurice
Maclennan, Robert


Barnett, Joel (Heywood and Royton)
Forrester, John
McNamara, J. Kevin


Baxter, William
Galpern, Sir Myer
Mahon, Simon (Bootle)


Benn, Rt. Hn. Anthony Wedgwood
Garrett, W. E.
Marks, Kenneth


Bennett, James (Glasgow, Bridgeton)
Gilbert, Dr. John
Marquand, David


Bidwell, Sydney
Golding, John
Marsden, F.


Blenkinsop, Arthur
Gordon Walker, Rt. Hn. P. C
Marshall, Dr. Edmund


Boardman, H. (Leigh)
Gourlay. Harry
Mason, Rt. Hn. Roy


Booth, Albert
Grant, George (Morpeth)
Mayhew, Christopher


Bottomley, Rt. Hn. Arthur
Grant, John D. (Islington, E.)
Meacher, Michael


Bradley, Tom
Griffiths, Eddie (Brightside)
Mellish, Rt. Hn. Robert


Broughton, Sir Alfred
Griffiths, Will (Exchange)
Mendelson, John


Brown, Robert C. (N'c'tle-u-Tyne, W.)
Grimond, Rt. Hn. J.
Millan, Bruce


Brown, Hugh D. (G'gow, Provan)
Hamilton, James (Bothwell)
Miller, Dr. M. S.


Brown, Ronald (Shoreditch &amp; F'bury)
Hamilton, William (Fife W.)
Milne, Edward


Buchanan, Richard (G'gow, Sp'burn)
Hamling, William
Mitchell, R. C. (S'hampton, Itchen)


Butler, Mrs. Joyce (Wood Green)
Hardy, Peter
Morgan, Elystan (Cardiganshire)


Callaghan, Rt. Hn. James
Harrison, Walter (Wakefield)
Morris, Alfred (Wythenshawe)


Carmichael, Neil
Healey, Rt. Hn. Denis
Morris, Charles R. (Openshaw)


Carter, Ray (Birmingh'm, Northfield)
Heffer, Eric S.
Mulley, Rt. Hn. Frederick


Carter-Jones, Lewis (Eccles)
Horam, John
Murray, Ronald King


Castle, Rt. Hn. Barbara
Huckfield, Leslie
Oakes, Gordon


Clark, David (Colne Valley)
Hughes, Mark (Durham)
Ogden, Eric


Cocks, Michael (Bristol, S.)
Hughes, Robert (Aberdeen, N.)
O'Halloran, Michael


Cohen, Stanley
Hughes, Roy (Newport)
O'Malley, Brian


Concannon, J. D.
Hunter, Adam
Oram, Bert


Corbet, Mrs. Freda
Irvine,Rt.Hn.SirArthur(Edge Hill)
Orbach, Maurice


Cox, Thomas (Wandsworth, C.)
Janner, Greville
Oswald, Thomas


Crawshaw, Richard
Jeger, Mrs. Lena
Owen, Dr. David (Plymouth, Sutton)


Cronin, John
Jenkins, Hugh (Putney)
Padley, Walter


Crosland, Rt. Hn. Anthony
Jenkins, Rt. Hn. Roy (Stechford)
Paget, R. T.


Cunningham, G. (Islington, S.W.)
John, Brynmor
Palmer, Arthur


Dalyell, Tam
Johnson, Walter (Derby, S.)
Pannell, Rt. Hn. Charles


Darling, Rt. Hn. George
Jones, Barry (Flint, E.)
Pardoe, John


Davidson, Arthur
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Parry, Robert (Liverpool, Exchange)


Davies, Denzil (Llanelly)
Jones, T. Alec (Rhondda, W.)
Pavitt, Laurie


Davis, Clinton (Hackney, C.)
Kaufman, Gerald
Pentland, Norman


Davis,Terry (Bromsgrove)
Kelley, Richard
Prentice, Rt. Hn. Reg.


Deakins, Eric
Kerr, Russell
Prescott, John


de Freitas, Rt. Hn. Sir Geoffrey
Lambie, David
Price, J. T. (Westhoughton)


Dell, Rt. Hn. Edmund
Lamborn, Harry
Price, William (Rugby)


Dempsey, James
Lamond, James
Probert, Arthur


Doig, Peter
Latham, Arthur
Rankin, John


Dormand, J. D.
Lawson, George
Reed, D. (Sedgefield)


Douglas, Dick (Stirlingshire, E.)
Leadbitter, Ted
Rees, Merlyn (Leeds, S.)


Douglas-Mann, Bruce
Lee, Rt. Hn. Frederick
Richard, Ivor


Driberg, Tom
Leonard, Dick
Roberts, Albert (Normanton)


Duffy, A. E. P.
Lever, Rt. Hn. Harold
Roberts, Rt. Hn.Goronwy (Caernarvon)


Dunnett, Jack
Lewis, Arthur (W. Ham, N.)
Robertson, John (Paisley)


Eadie, Alex
Lewis, Ron (Carlisle)
Rodgers, William (Stockton-on-Tees)


Edwards, Robert (Bilston)
Lipton, Marcus
Roper, John


Edwards, William (Merioneth)
Lomas, Kenneth
Rose, Paul B.


English, Michael
Loughlin, Charles
Ross, Rt. Hn. William (Kilmarnock)


Evans, Fred






Rowlands, Ted
Stonehouse, Rt. Hn. John
Whitlock, William


Sheldon, Robert (Ashton-under-Lyne)
Strang, Gavin
Willey, Rt. Hn. Frederick


Shore, Rt. Hn. Peter (Stepney)
Tinn, James
Williams, Alan (Swansea, W.)


Short,Rt.Hn.Edward (N'c'tle-u-Tyne)
Tomney, Frank
Williams, Mrs. Shirley (Hitchin)


Silkin, Rt. Hn. John (Deptford)
Torney, Tom
Williams, W. T. (Warrington)


Sillars, James
Urwin, T. W.
Wlson, Alexander (Hamilton)


Skinner, Dennis
Varley, Eric G.
Wilson, Rt. Hn. Harold (Huyton)


Small, William
Wainwright, Edwin
Wilson, William (Coventry, S.)


Spearing, Nigel
Walden, Brian (B'm'ham, All Saints)
Woof, Robert


Stallard, A. W.
Walker, Harold (Doncaster)



Steel, David
Watkins, David
TELLERS FOR THE AYES:


Stewart, Donald (Western Isles)
Wellbeloved, James
Mr. Donald Coleman and


Stewart, Rt. Kn. Michael (Fulham)
Whitehead, Philip
Mr. Joseph Harper.




NOES


Adley, Robert
Elliott, R. W. (N'c'tle-upon-Tyne,N.)
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)


Alison, Michael (Barkston Ash)
Emery, Peter
Lloyd, Ian (P'tsm'th, Langstone)


Allason, James (Hemel Hempstead)
Eyre, Reginald
Longden, Sir Gilbert


Amery, Rt. Hn. Julian
Farr, John
Loveridge, John


Astor, John
Fenner, Mrs. Peggy
Luce, R. N.


Atkins, Humphrey
Fidler, Michael
MacArthur, Ian


Awdry, Daniel
Finsberg, Geoffrey (Hampstead)
McCrindle, R. A.


Baker, Kenneth (St. Marylebone)
Fisher, Nigel (Surbiton)
McLaren, Martin


Balniel, Rt. Hn. Lord
Fletcher-Cooke, Charles
McNair-Wilson, Michael


Barber, Rt. Hn. Anthony
Fookes, Miss Janet
McNair-Wilson, Patrick (NewForest)


Batsford, Brian
Fortescue, Tim
Maddan, Martin


Beamish, Col. Sir Tufton
Fowler, Norman
Madel, David


Bell, Ronald
Fox, Marcus
Marten, Neil


Bennett, Sir Frederic (Torquay)
Fry, Peter
Mather, Carol


Benyon, W.
Gibson-Watt, David
Mawby, Ray


Berry, Hn. Anthony
Gilmour, Sir John (Fife, E.)
Maxwell-Hyslop, R. J.


Biffen, John
Glyn, Dr. Alan
Meyer, Sir Anthony


Biggs-Davison, John
Godber, Rt. Hn. J. B.
Mills, Peter (Torrington)


Blaker, Peter
Goodhart, Philip
Miscampbell, Norman


Boardman, Tom (Leicester, S.W.)
Goodhew, Victor
Moate, Roger


Boscawen, Hn. Robert
Gorst, John
Money, Ernle


Braine, Sir Bernard
Gower, Raymond
Monks, Mrs. Connie


Bray, Ronald
Grant, Anthony (Harrow, C.)
Monro, Hector


Brewis, John
Gray, Hamish
Montgomery, Fergus


Brinton, Sir Tatton




Brocklebank-Fowler, Christopher
Green, Alan
Morgan, Geraint (Denbigh)


Brown, Sir Edward (Bath)
Grylls, Michael
Morgan-Giles, Rear-Adm.


Bruce-Gardyne, J.
Hall, Miss Joan (Keighley)
Morrison, Charles


Bryan, Sir Paul
Hall, John (Wycombe)
Mudd, David


Buchanan-Smith, Alick(Angus,N&amp;M)
Hamilton, Michael (Salisbury)
Neave, Airey


Buck, Antony
Harrison, Brian (Maldon)
Nicholls, Sir Harmar


Bullus, Sir Eric
Havers, Michael
Noble, Rt. Hn. Michael


Burden, F. A.
Hawkins, Paul
Normanton, Tom


Butler, Adam (Bosworth)
Higgins, Terence L.
Nott, John


Campbell, Rt.Hn.G.(Moray&amp;Nairn)
Hiley, Joseph
Onslow, Cranley


Carlisle, Mark
Hill, John E. B. (Norfolk, S.)
Oppenheim, Mrs. Sally


Carr, Rt. Hn. Robert
Hill, James (Southampton, Test)
Owen, Idris (Stockport, N.)


Cary, Sir Robert
Holland, Philip
Page, Rt. Hn. Graham


Chapman, Sydney
Hordern, Peter
Page, John (Harrow, w.)


Chataway, Rt. Hn. Christopher
Hornsby-Smith,Rt.Hn.Dame Patricia
Percival, Ian


Chichester-Clark, R.
Howe, Hn. Sir Geoffrey (Reigate)
Peyton, Rt. Hn. John


Churchill, W. S.
Howell, Ralph (Norfolk, N.)
Pink, R. Bonner


Clark, William (Surrey, E.)
Hunt, John
Powell, Rt. Hn. J. Enoch


Clarke, Kenneth (Rushcliffe)
Hutchison, Michael Clark
Price, David (Eastleigh)


Clegg, Walter
Irvine, Bryant Godman (Rye)
Proudfoot, Wilfred


Cockeram, Eric
James, David
Pym, Rt. Hn. Francis


Cooke, Robert
Jenkin, Patrick (Woodford)
Quennell, Miss J. M.


Coombs, Derek
Jessel, Toby
Raison, Timothy


Cooper, A. E.
Johnson Smith, G. (E. Grinstead)
Ramsden, Rt. Hn. James


Cordle, John
Jones, Arthur (Northants, S.)
Redmond, Robert


Corfield, Rt. Hn. Sir Frederick
Kaberry, Sir Donald
Reed, Laurance (Bolton. E.)


Cormack, Patrick
Kellett-Bowman, Mrs. Elaine
Rees, Peter (Dover)


Costain, A. P.
Kershaw, Anthony
Rees-Davies, W. R.


Critchley, Julian
Kimball, Marcus
Renton, Rt. Hn. Sir David


Crouch, David
King, Evelyn (Dorset, S.)
Ridley, Hn. Nicholas


Crowder, F. P.
King, Tom (Bridgwater)
Ridsdale, Julian


Dalkeith, Earl of
Kinsey, J. R.
Rippon, Rt. Hn. Geoffrey


d'Avigdor-Goldsmid, Sir Henry
Kirk, Peter
Roberts, Wyn (Conway)


d'Avigdor-Goldsmid.Maj.-Gen. James
Kitson, Timothy
Rodgers, Sir John (Sevenoaks)


Deedes, Rt. Hn. W. F.
Knight, Mrs. Jill
Rossi. Hugh (Hornsey)


Digby, Simon Wingfield
Knox, David
Rost, Peter


Dixon, Piers
Lambton, Lord
St. John-Stevas, Norman


Douglas-Home, Rt. Hn. Sir Alec
Lamont, Norman
Scott-Hopkins, James


du Cann, Rt. Hn. Edward
Lane, David
Sharples, Sir Richard


Dykes, Hugh
Langford-Holt, Sir John
Shaw, Michael (Sc'b'gh &amp; Whitby)


Edwards. Nicholas (Pembroke)
Le Merchant, Spencer
Shelton, William (Clapham)


Elliot, Capt. Walter (Carshalton)
Lewis, Kenneth (Rutland)
Skeet, T. H. H.







Smith, Dudley (W'wick &amp; L'mington)
Temple, John M.
Ward, Dame Irene


Soref, Harold
Thatcher, Rt. Hn. Mrs. Margaret
Warren, Kenneth


Speed, Keith
Thomas, John Stradling (Monmouth)
Weatherill, Bernard


Spence, John
Thomas, Rt. Hn. Peter (Hendon, S.)
Wiggin, Jerry


Stainton, Keith
Thompson, Sir Richard (Croydon, S.)
Wilkinson, John


Stanbrook, Ivor
Tilney, John
Wolrige-Gordon, Patrick


Stewart-Smith, Geoffrey (Belper)
Trew, Peter
Woodhouse, Hn. Christopher


Stoddart-Scotf, Col. Sir M.
Tugendhat, Christopher
Worsley, Marcus


Stokes, John
Turton, Rt. Hn. Sir Robin
Wylie, Rt. Hn. N. R.


Tapsell, Peter
van Straubenzee, W. R.



Taylor, Sir Charles (Eastbourne)
Vickers, Dame Joan
TELLERS FOR THE NOES:


Taylor,Edward M.(G'gow,Cathcart)
Waddington, David
Mr. Michael Jopling and


Taylor, Frank (Moss Side)
Walder, David (Clitheroe)
Mr. Oscar Murton.


Taylor, Robert (Croydon, N.W.)
Walker-Smith, Rt. Hn. Sir Derek



Tebbit, Norman
Walters, Dennis

Question accordingly negatived.

Mr. Higgins: I beg to move Amendment No. 67, in page 111, line 34, after 'airport', insert:
'or on land adjacent to a port'.
The effect of the Amendment is to extend the zero-rating for port handling services to those which are provided on the immediate land area of the port.
The note to Schedule 4, Group 9, gives "port" the same meaning as in the Customs and Excise Act, 1952. A port for the purpose of that Act is restricted to the shore line and three miles out to sea. It does not include any land area, so that handling services on port wharves and quays would not be entitled to zero-rating as the Bill stands.
Without the Amendment all port services provided on the immediate land area adjacent to the port would be taxable at the standard rate. This could impose a discriminatory tax charge on imports, which could be held to be contrary to GATT, or a hidden tax burden on exports. For these reasons it is considered that this defect should be remedied. This is what the Amendment does. I hope it will commend itself to the House.

Amendment agreed to.

Further Amendment made: No. 68, in page 111, line 45, at end insert:
'(2) The supply of any ship or aircraft includes the supply of any services under a charter of the ship or aircraft.
(3) "Lifeboat" includes any ship used as a lifeboat'.—[Mr. Higgins.]

Mr. Ray Mawby: I beg to move Amendment No. 164, in page 112, line 4, at end insert:
'2. Trailer caravans exceeding 7 metres in length and 7·5 feet in width having at least four wheels and the wheel base at least three-fifths of the overall length.'

The House will know that the aim and principle is to try to give zero-rating to any accommodation that people make their homes. For this reason, Item No. 1 on page 112, which deals with caravans, tries to differentiate between caravans which people use as permanent homes and those normally used for touring. It is obvious that it is difficult to find the form of words to differentiate between the two. Therefore, the form of words in the Schedule concerns itself only with caravans which would not be allowed, under the Transport Acts, to use the public highways. So zero rating is now confined to a caravan which an owner would find it impossible to move on a public highway.
The difficulty is that some people in this country must have caravans as permanent homes because they are used in the course of their employment. One important group of people is the showmen of this country who, for the season in any year, hold a series of fairs of comparatively short duration and travel in whichever region they normally reckon to hold such fairs.
The nature of a showman's employment is such that he must have a trailer or caravan which he would normally use as his home for himself and his family during the travelling season. He will then normally go to winter quarters. The majority of showmen still use their caravans, though in permanent positions, as their winter quarters.
The aim, which has been made clear by my hon. Friend the Financial Secretary, should be to relieve caravans wherever it can be shown that they are being used as permanent homes as opposed to touring for relaxation, hobby, or whatever one likes. On this basis I believe we should seek a form of words to make certain that this group of people enjoy the home zero-rating because, by


the nature of their employment, they must live in vehicles which are capable of moving on the highways. At the moment Item No. 1 does not cover them because they must have a trailer which is capable of travelling on the public highway.
The Customs and Excise is sympathetic to this matter. Indeed, I have changed the wording of the Amendment on Report to ensure a minimum size. I thought this might help. If hon. Members thinks that anyone would seek to have a vehicle of the type described in the Amendment made to take on holiday, they have only to visualise what it would be like to realise how mistaken they would be.
6.0 p.m.
This is very much a utility vehicle and is designed so that a person can use it as his home. It has to be more robust than any normal touring caravan. It is normally towed along with the wagons carrying the tools of the trade of the showman. The Amendment is restrictive, and would not be liable to be extended to other users.
It may be said that we ought to think of people employed on public works who, because of their employment, have to move from job to job and therefore might want to use this kind of vehicle. If that argument is advanced, my reply will be that they, too, should be exempt. I cannot see any large group of people being able to take advantage of these criteria in order to get zero-rating on a caravan which is not, and is not likely to be, used as a permanent home throughout the 12 months of the year.

Mr. Higgins: If I may intervene at this stage of the debate I think that it might be convenient to the House and might speed up proceedings.
I listened with great care to the way in which my hon. Friend the Member for Totnes (Mr. Mawby) moved his Amendment. As he said, the Bill is concerned to zero-rate caravans which are analagous to dwelling accommodation but as it has not been possible to say how a caravan would be used, the criterion for relief is whether it can be used only on a permanent site or towed on the road, and the simple criterion which has been used is whether, under the Motor Vehicle Construction and Use Regulations, 1969, a

caravan may be towed as a trailer on the road.
The Government are not unsympathetic to my hon. Friend's intention, and I know that he has given considerable thought to this matter. He originally put down another Amendment, which has not been selected. This is the same Amendment, Mark 2. We have looked at it carefully, and there have been consultations between those concerned, particularly the showmen, and Customs and Excise.
We are sympathetic to what my hon. Friend has in mind, but we cannot say for certain that the drafting of his Amendment is satisfactory to achieve the objective which he has outlined without unfortunate side effects which neither he nor the House intend. That being so, I cannot
recommend the acceptance of the Amendment as it stands. The House will appreciate that this is something which can be dealt with by order under other provisions of the Bill if it becomes an Act. Should we in due course want to make such an order, it will be possible to do so.
This is really a question of making sure that the drafting of the Amendment is as perfect as we can get it. My hon. Friend has had two shots at it, and has got very close to what is needed, but we should like to make sure that the drafting is correct. In the light of what I have said, I hope that my hon. Friend will feel able to withdraw his Amendment. We shall consider it further in consultation with the parliamentary draftsmen and interested parties.

Mr. Dalyell: The Financial Secretary has given a reasonable answer to the case made by the hon. Member for Totnes (Mr. Mawby). May I reinforce that case by drawing the Minister's attention to what happened when the Forth Bridge, one end of which is in my constituency, was being built. A number of skilled steel erectors came up to do the work, and on completion of it they moved on to another job. This is a way of life for them, and I should have thought that reinforces the case made on behalf of the showmen.

Dame Irene Ward: My hon. Friend the Member for Totness (Mr. Mawby) and I are anxious to have embodied in legislation this Amendment which emanates from the Showmen's Guild. I think


the whole House will agree with me when I say that the country is brighter and better for having a touring Showmen's Guild. We want to do everything that we can to help its members, and I am therefore particularly grateful to my hon. Friend the Financial Secretary for his sympathetic approach to the Amendment. VAT is a complicated matter, and the more I listen to these debates the more complicated things become to me—I am not what one might call mathematically minded.
During the period that we have been discussing these matters with the Treasury, Ministers and Treasury officials could not have been more helpful. They have suggested that representatives of the Showmen's Guild should discuss the matter with Customs and Excise. This all sounds alarming to me, but I presume it is the right thing to do.
Members of the Showmen's Guild play a great part in our national life, and we want to see that extended because we think that it is good for the population. It gives a great deal of pleasure, and provides a considerable amount of employment. We are all devoted to those who make up the Showmen's Guild.
It is rather fun to know that sometimes Treasury Ministers find it difficult to arrive at a conclusion. My hon. Friend has not arrived at a conclusion, but he says that he will. There are three stalwart supporters of the Amendment, and we know that we shall get all the support that is necessary to ensure that the Showmen's Guild gets zero-rating, which we regard as necessary to enable this important national industry to be carried on.
I gather from what has been said that the Customs and Excise has not arrived at an acceptable form of words, but I know that what my hon. Friend has said from the Front Bench will give great pleasure to the Showmen's Guild. I wish that we could have many more Amendments accepted with the pleasure and charm that we have seen today. We know that if the Government decide to do something they will do it, and I hope that the difficulties in this instance will not be too great to be overcome by Treasury Ministers. Sometimes I wonder whether I am right in saying that.
At any rate, we thank the Government. The Showmen's Guild will be absolutely delighted. In my part of the world we have the biggest set-up of the Showmen's Guild on the Town Moor at Newcastle-upon-Tyne. It has gone on for years, and I hope that my hon. Friend's pledge will be honoured by
a proper form of words appearing in the Statute Book. When that happens we shall have the Minister up to our area and he will learn a great deal more about showmen and what they do for our national life. When he does, he will be as pleased as we are that he has been able to accede to our case.

Dr. Gilbert: The hon. Member for Totnes (Mr. Mawby) will be glad to hear that there is no difference between the two sides of the House on this Amendment. I should like to congratulate the hon. Gentleman on the eloquent way in which he moved it. However, there is one point on which I should like some clarification from the Financial Secretary. Would caravans of the type or similar to them, used by the Showman's Guild which attract VAT not be considered input for business purposes and therefore qualify for relief under those provisions of the Bill?

Mr. Higgins: By leave of the House. The hon. Member for Dudley (Dr. Gilbert) has a flair, which I am beginning to appreciate more, for finding particularly detailed points which are of some interest, although I feel bound to say on this issue perhaps of some esoteric interest.
The point the hon. Gentleman has put to me would raise considerable problems if we were to say that people who happened to live in a particular structure could say that was something which they could deduct in the course of their business. There are a large number of pitfalls here. The more suitable course of action would be to proceed on the basis which I have suggested, and do what we can to help with showmen's caravans on the basis that these are normally occupied effectively as a home.
It is clear what we have in mind, and that is only showmen's caravans. I hope that my hon. Friend will see fit to withdraw the Amendment. I am grateful for the remarks of my hon. Friend the Member for Tynemouth (Dame Irene Ward)

Mr. Mawby: I am grateful to the Financial Secretary. At least we can say that we have our foot in the door. I assure my hon. Friend that we shall not take it out until we have got the door wide open. I appreciate what my hon. Friend has said. On behalf of the Showman's Guild, I thank the Customs and Excise which has been extremely helpful and tried to do what it could to meet this point.
On the undertaking my hon. Friend has given, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Dr. Gilbert: I beg to move Amendment No. 70, in page 112, line 29 leave out from '1925' to end of line 32.
The effect of the Amendment is to remove from Schedule 4 the requirement that the supply of goods dispensed by pharmaceutical chemists should be backed by a prescription from a medical practitioner, a temporary registered medical practitioner or a dentist to qualify for zero-rating.
The Bill without the Amendment would merely give effect to an additional financial inducement for a person to go to a medical practitioner for a prescription rather than to a chemist.
There is a significant word at page 112, line 26, namely "dispensed". I understand that "dispensed" has a fairly technical meaning. It applies only to the supply of goods where the pharmaceutical chemist uses a dgree of his own professional judgment in deciding what to make up for a customer. In other words, a customer may go in and say "I have a headache and I should like a bottle of aspirin tablets". That does not involve the dispensing of aspirin tablets. If a customer goes into a chemist's shop and says "I have a headache"—or it may be a bad cold—"what can you give me?" and the chemist prescribes a well-known proprietary medicine which he takes off the shelf, that also does not constitute the dispensing of the medicine in the terms of the provision. In other words, for a medicine to be "dispensed" requires the chemist to use his own judgment of what the customer requires, to make it up from various ingredients and label it as a special, custom-made job.
6.15 p.m.
I understand that only 2 per cent. to 5 per cent. of pharmaceutical business is dispensed in those terms. On the other
hand that business has been growing, and for quite obvious reasons. The main reason is that there is a delay nowadays in getting to see a doctor because of the pressure on doctors' surgery time. In some parts of the country it is necessary to make an appointment two or three days in advance to see a doctor. The result is a great incentive to the public to go to
the pharmacist with a relatively minor complaint and seek to benefit from his professional skill in having proper medication prepared. The people who do that are not making frivolous visits. If they were doing so they would go to the doctor to get a prescription, which would mean that even with the 20p charged on prescriptions they would be getting medication at a cheaper rate than if they were going to the pharmacist.
In every way the Amendment would be of great social value. It would save the time that the public now have to spend visiting doctors' surgeries. It would save the public's money because there are few medications which have to be dispensed in the way I have defined "dispensed". It would cost less than the 20p prescription charge. There is also the additional paper work for the doctor, who would have to see people who otherwise would have gone and received treatment direct from the pharmacist. There is the additional waiting time for the other patients who have to see the doctor and who do not have this option open to them. Those people would suffer because of the provisions of the Bill as it stands. There is also extra work for the chemists.
If we do not make the Amendment chemists will be faced with a situation where certain types of medication which are dispensed will be subject to VAT and other types will not. In other words, they will have to keep two types of record, with all the additional administrative complications which we have heard about in great detail in other discussions on the Bill. Further, unless this useful little simplification is introduced, there will be the extra work involved in the administration of VAT. I see no good argument for not accepting the Amendment. For all these reasons, but mainly because


of the social consequences rather than the economic consequences which are involved, I comment the Amendment to the House.

Mr. Lewis Carter-Jones: There is a serious paradox about prescribing. If a prescription is taken to a chemist it is prescribed free of VAT, but if it is taken to an appliance centre VAT will have to be paid—on the same prescription. We have been told that one of the reasons why exemptions from VAT cannot be made is administrative difficulties, yet the Minister or his Department propose that if the same prescription is taken to an appliance centre the Treasury or the Customs and Excise is prepared to look at each prescription and to have VAT reclaimed. I understand that representations have been made on this to the Treasury and the Customs and Excise. If VAT is a tax which is difficult to administer, why is the Minister prepared to accept the huge administrative cost of treating the prescription taken to an appliance centre in that way—by claiming the tax back?

Mr. Nott: The effect of the Amendment is to zero-rate the supply of any goods dispensed by a pharmaceutical chemist, since it removes the provision which links relief not only to dispensing by a chemist but also to prescription by a doctor. It is the link with the medical practitioner which under the Bill as drafted makes the prescription by a chemist zero-rated. We have debated around the point raised by the hon. Member for Eccles (Mr. Carter-Jones) on several occasions and he is correct in saying that the same prescription if taken to an appliance contractor would not be zero-rated.
The hon. Member went over this ground when we debated the Amendments concerning surgical appliances. Broadly speaking, the reason is that we cannot define "appliance contractors" in the same way as we are able to define "pharmaceutical chemists" when they are actually dispensing a prescription provided by a doctor. I take the point the hon. Gentleman makes and confirm its accuracy that if the same prescription went to an appliance contractor, the item would not be zero-rated. As I made clear when we debated drugs and medicines, the Government's policy is not

specifically to zero-rate medical goods but to link zero-rating to the clinical responsibility and the diagnosis of a registered doctor or dentist.
The effect of the Amendment would be to put the pharmacist in the same position as a doctor dentist. It would remove the present controlling feature within the Bill—I know that this is intentional—of prescription by a doctor. Drugs and medicines are at present chargeable for purchase tax, subject to a list of specific exemptions. This list and the regulations that go with it, although practicable in a single-stage tax like purchase tax. do not make sense under VAT.
The relief proposed in the Amendment—this is the real objection to it—could apply to virtually any goods supplied by a pharmacist even where those goods were supplied on non-medical grounds. The meaning of the word "dispense" is not precise. I know that the hon Member for Dudley (Dr. Gilbert) is saying that it is, but in our view it is not precise and it is certainly not limited to what is done in a pharmacist's dispensary. The revenue lost, even from items supplied for a medical purpose although not on prescription, would be substantial. While I appreciate that the Pharmaceutical Society is anxious to emphasise the right of the chemist to prescribe at the counter—this is really what is behind the Amendment—what it means by counter prescribing is to produce prescriptions when a customer asks a chemist for advice on what preparation to buy.
I understand what the society is seeking but I am afraid that we are not able to change the basis upon which the tax is constructed to meet the point. If we accepted the Amendment the relief would apply to goods solely by reason of their supply by a pharmacist, and this would create inequities beside the supply of other products. For instance, many proprietary drugs and medicines are supplied in grocery shops and chain stores. A good example would be cough syrups and aspirins. This is the problem which arises from the Amendment. While I appreciate the feelings of the pharmacists on this issue and the reasons why they are making these representations, it is only right that I should repeat that the estimated yield on purchase tax from drugs


and medicines is now about £17 million in a full year while the estimated yield from drugs and medicines under VAT will be about £10 million a year.
Although I believe that pharmacists feel that a matter of principle is at stake, for the vast range of their goods they compete with other outlets and the interpretation of the word "prescribed" Is not as the hon. Gentleman suggests. Since the vast range of drugs and medicines which pharmacists are selling will be bearing a considerable lower rate of tax under VAT than they are now under purchase tax, I hope that the House will feel that this is reasonable and that the hon. Gentleman will withdraw his Amendment.

Dr. Gilbert: I do not find the hon. Gentleman's reply in any way satisfactory. He has sought to widen the area of debate from the somewhat narrow focus into which I put it. He talked at length about proprietary drugs, but I made it clear from start to finish that I was not talking about them at all. The Amendment was not put down by this side of the House as a result of any urging by the Pharmaceutical Society. We tabled it ourselves because our principal concern was with members of the public and the pressure on doctors' surgeries. There were the two reasons of the additional cost to the public of the Bill and also the attempt to relieve the enormous over-burden to which the doctors have to submit themselves in prescribing relatively routine medication.

As the hon. Gentleman conceded, we recognise the law that the pharmaceutical industry has professional skill in these matters it is entitled to prescribe. There is therefore no reason why it should be penalised in this way. I will not conceal from the hon. Gentleman that I have had discussions with the Pharmaceutical Society, but they were at my initiative. While I am wholly sympathetic to the society's case, it is by no means the main reason for the Amendment. We consider on every possible social ground that it is desirable that there should be no discrimination between dispensed goods and the Pharmaceutical Society was quite clear, on the lines I indicated earlier, that goods could be categorised as being dispensed in a way that the Minister of State said was not possible.

Even if we were to accept the hon. Gentleman's technical objection to my definition of dispensed goods—goods that have to be brought out of the dispensary by the pharmacist and put in a tin or a bottle and labelled specially for one customer—the least the hon. Gentleman could have done was to meet the point of principle and say that he would find a form of words that would meet our objections. We have had no encouragement from him and we find his arguments totally unconvincing. I therefore advise my right hon. and hon. Friends to divide in support of the Amendment.

Question put, That the Amendment be made: —

The House divided: Ayes 200. Noes 219.

Division No. 289.]
AYES
[6.29 p.m.


Albu, Austen
Carter-Jones, Lewis (Eccles)
Duffy, A. E. P.


Allaun, Frank (Salford, E.)
Castle, Rt. Hn. Barbara
Dunnett, Jack


Allen, Scholefield
Clark, David (Colne Valley)
Eadie, Alex


Archer, Peter (Rowley Regis)
Cocks, Michael (Bristol, S.)
Edelman, Maurice


Atkinson, Norman
Cohen, Stanley
Edwards, Robert (Bilston)


Barnett, Guy (Greenwich)
Concannon, J. D.
Edwards, William (Merioneth)


Barnett, Joel (Heywood and Royton)
Corbet, Mrs. Freda
English, Michael


Baxter, William
Cox, Thomas (Wandsworth, C.)
Evans, Fred


Benn, Rt. Hn. Anthony Wedgwood
Crawshaw, Richard
Ewing, Henry



Cronin, John
Faulds, Andrew


Bennett, James (Glasgow, Bridgeton)
Crosland, Rt. Hn. Anthony
Fisher,Mrs.Doris(B'ham,Ladywood)


Bidwell, Sydney
Dalyell, Tam
Fitch, Alan (Wigan)


Boardman, H. (Leigh)
Darling, Rt. Hn. George
Fletcher, Raymond (Ilkeston)


Booth, Albert
Davidson, Arthur
Fletcher, Ted (Darlington)


Bottomley, Rt. Hn. Arthur
Davis, Clinton (Hackney, C.)
Forrester, John


Bradley, Tom
Davis, Terry (Bromsgrove)
Garrett, W. E.


Broughton, Sir Alfred
Deakins, Eric
Gilbert, Dr. John


Brown, Bob (N'c'tle-upon-Tyne,W.)
de Freitas, Rt. Hn. Sir Geoffrey
Golding, John


Brown, Hugh D. (G'gow, Provan)
Dell, Rt. Hn. Edmund
Gordon Walker, Rt. Hn. P. C.


Brown, Ronald (Shoreditch &amp; F'bury)
Dempsey, James
Gourlay, Harry


Buchanan, Richard (G'gow, Sp'burn)
Doig, Peter
Grant, George (Morpeth)


Butler, Mrs. Joyce (Wood Green)
Dorman, J. D.
Grant, John D. (Islington, E.)


Callaghan, Rt. Hn. James
Douglas, Dick (Stirlingshire, E.)
Griffiths, Eddie (Brightside)


Carmichael, Neil
Douglas-Mann, Bruce
Griffiths, Will (Exchange)


Carter, Ray (Birmingh'm, Northfield)
Driberg, Tom
Grimond, Rt. Hn. J.




Hamilton, James (Bothwell)
Marks, Kenneth
Robertson, John (Paisley)


Hamilton, William (Fife, W.)
Marquand, David
Rodgers, William (Stockton-on-Tees)


Hamling,William
Marsden, F.
Roper, John


Hardy, Peter
Marshall, Dr. Edmund
Rose, Paul B.


Harper, Joseph
Mason, Rt. Hn. Roy
Rowlands, Ted


Harrison, Walter (Wakefield)
Mayhew, Christopher
Sheldon, Robert (Ashton-under-Lyne)


Healey, Rt. Hn. Denis
Meacher, Michael
Shore, Rt. Hn. Peter (Stepney)


Heffer, Eric S.
Mellish, Rt. Hn. Robert
Short,Rt.Hn.Edward(N'c'tle-u-Tyne)


Huckfield, Leslie
Mendelson, John
Silkin, Rt. Hn. John (Deptford)


Hughes, Mark (Durham)
Millan, Bruce
Sillars, James


Hughes, Robert (Aberdeen, N.)
Miller, Dr. M. S.
Skinner, Dennis


Hughes, Roy (Newport)
Mitchell, R. C. (S'hampton, Itchen)
Small, William


Hunter, Adam
Morgan, Elystan (Cardiganshire)
Spearing, Nigel


Irvine,Rt.Hn.SirArthur(Edge Hill)
Morris, Alfred (Wythenshawe)
Stallard, A. W.


Janner, Greville
Morris, Charles R. (Openshaw)
Steel, David


Jeger, Mrs. Lena
Mulley, Rt. Hn. Frederick
Stewart, Donald (Western Isles)


Jenkins, Hugh (Putney)
Murray, Ronald King
Stewart, Rt. Hn. Michael (Fulham)


Jenkins, Rt. Hn. Roy (Stechford)
Oakes, Gordon
Stoddart, David (Swindon)


John, Brynmor
Ogden, Eric
Stonehouse, Rt. Hn. John


Johnson, Walter (Derby, S.)
O'Halloran, Michael
Strang, Gavin


Jones, Barry (Flint, E.)
O'Malley, Brian
Tinn, James


Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Oram, Bert
Tomney, Frank


Jones, T. Alec (Rhondda, W.)
Orbach, Maurice
Torney, Tom


Kaufman, Gerald
Oswald, Thomas
Urwin, T. W.


Kelley, Richard
Owen, Dr. David (Plymouth, Sutton)
Varley, Eric G.


Lambie, David
Padley, Walter
Wainwright, Edwin


Lamond, James
Paget, R. T.
Walden, Brian (B'm'ham, All Saints)


Latham, Arthur
Palmer, Arthur
Walker, Harold (Doncaster)


Lawson, George
Pannell, Rt. Hn. Charles
Watkins, David


Lee. Rt. Hn. Frederick
Pardoe, John
Wellbeloved, James


Leonard. Dick
Pavitt, Laurie
Whitehead, Phillip


Lestor, Miss Joan
Pentland, Norman
Whitlock, William


Lever, Rt. Hn. Harold
Prentice, Rt. Hn. Reg.
Willey, Rt. Hn. Frederick


Lewis, Arthur (W. Ham, N.)
Prescott, John
Williams, Alan (Swansea, W.)


Lewis, Ron (Carlisle)
Price, J. T. (Westhoughton)
Williams, W. T. (Warrington)


Loughlin. Charles
Price, William (Rugby)
Wilson, Alexander (Hamilton)


Mabon, Dr. J. Dickson
Probert, Arthur
Wilson, Rt. Hn. Harold (Huyton)


McBride, Neil
Rankin, John
Wilson, William (Coventry, S.)


McCartney, Hugh
Reed, D. (Sedgefield)
Woof, Robert


Mackenzie, Gregor
Rees, Merlyn (Leeds, S.)



Mackintosh, John P.
Richard, Ivor
TELLERS FOR THE AYES:


Maclennan, Robert
Roberts, Albert (Normanton)
Mr. Ernest Armstrong and


McNamara. J. Kevin
Roberts,Rt.Hn.Goronwy (Caernarvon)
Mr. Donald Coleman.


Mahon, Simon (Bootle)






NOES


Adley, Robert
Carr, Rt. Hn. Robert
Fletcher-Cooke, Charles


Alison, Michael (Barkston Ash)
Cary, Sir Robert
Fookes, Miss Janet


Allason, James (Hemel Hempstead)
Chapman, Sydney
Fortescue, Tim


Amery, Rt. Hn. Julian
Chataway, Rt. Hn. Christopher
Fowler, Norman


Astor, John
Chichester-Clark, R.
Fox, Marcus


Atkins, Humphrey
Churchill, W. S.
Fry, Peter


Awdry, Daniel
Clark, William (Surrey, E.)
Gibson-Watt, David


Baker, Kenneth (St. Marylebone)
Clegg, Walter
Gilmour, Sir John (Fife, E.)


Balniel, Lord
Cockeram, Eric
Glyn, Dr. Alan


Barber, Rt. Hn. Anthony
Cooke, Robert
Godber, Rt. Hn. J. B.


Batsford, Brian
Coombs, Derek
Goodhew, Victor


Beamish, Col. Sir Tufton
Cordle, John
Gorst, John




Gower, Raymond


Bell, Ronald
Corfield, Rt. Hn. Frederick
Grant, Anthony (Harrow. C.)


Bennett, Sir Frederic (Torquay)
Cormack, Patrick
Gray, Hamish


Benyon, W.
Costain, A. P.
Green, Alan


Berry, Hn. Anthony
Critchley, Julian
Grylls, Michael


Biffen, John
Crouch, David
Gummer, Selwyn


Biggs-Davison, John
Crowder, F. P.
Hall, Miss Joan (Keighley)


Blaker, Peter
Dalkeith, Earl of
Hall, John (Wycombe)


Boardman, Tom (Leicester, S.W.)
d'Avigdor-Goldsmid, Sir Henry
Hamilton, Michael (Salisbury)


Boscawen, Robert
Deedes, Rt. Hn. W. F.
Harrison, Brian (Maldon)


Bowden, Andrew
Digby, Simon Wingfield
Havers, Michael


Bray, Ronald
Dixon, Piers
Hawkins, Paul


Brewis, John
Douglas-Home, Rt. Hn. Sir Alec
Higgins, Terence L.


Brinton, Sir Tatton
du Cann, Rt. Hn. Edward
Hill, John E. B. (Norfolk, S.)


Brocklebank-Fowler, Christopher
Dykes, Hugh
Hill, James (Southampton, Test)


Brown, Sir Edward (Bath)
Edwards, Nicholas (Pembroke)
Holland, Philip


Bruce-Gardyne, J.
Elliot, Capt. Waller (Carshalton)
Hordern, Peter


Bryan, Paul
Elliott, R. W. (N'c'tle-upon-Tyne.N.)
Hornsby-Smith,Rt.Hn.Dame Patricia


Buchanan-Smith, Alick(Angus,N&amp;M)
Emery, Peter
Howe, Hn. Sir Geoffrey (Reigate)


Buck, Antony
Eyre, Reginald
Howell, Ralph (Norfolk, N.)


Bullus, Sir Eric
Farr, John
Hunt, John


Burden, F. A.
Fenner, Mrs. Peggy
Hutchison, Michael Clark


Butler, Adam (Bosworth)
Fidler, Michael
Iremonger, T. L.


Campbell, Rt.Hn.G.(Moray&amp;Nairn)
Finsberg, Geoffrey (Hampstead)
Irvine, Bryant Godman (Rye)


Carlisle, Mark
Fisher. Nigel (Surbiton)
James, David







Jenkin, Patrick (Woodford)
Morgan, Geraint (Denbigh)
Smith, Dudley (W'wick &amp; L'mington)


Jessel, Toby
Morgan-Giles, Rear-Adm.
Soref, Harold


Jones, Arthur (Northants, S.)
Morrison, Charles
Speed, Keith


Jopling, Michael
Mudd, David
Spence, John


Kaberry, Sir Donald
Murton, Oscar
Stainton, Keith


Kellett-Bowman, Mrs. Elaine
Neave, Airey
Stanbrook, Ivor


Kershaw, Anthony
Noble, Rt. Hn. Michael
Stewart-Smith, Geoffrey (Belper)


King, Evelyn (Dorset, S.)
Normanton, Tom
Stoddart-Scott, Col. Sir M.


King, Tom (Bridgwater)
Nott, John
Stokes, John


Kinsey, J. R.
Onslow, Cranley
Tapsell, Peter


Kirk, Peter
Oppenheim, Mrs. Sally
Taylor,Edward M.(G'gow,Cathcart)


Knight, Mrs. Jill
Osborn, John
Taylor, Frank (Moss Side)


Knox, David
Owen, Idris (Stockport, N.)
Tebbit, Norman


Lambton, Lord
Page, Graham (Crosby)
Temple, John M.


Langford-Holt, Sir John
Page, John (Harrow, W.)
Thatcher, Rt. Hn. Mrs. Margaret


La Marchant, Spencer
Percival, Ian
Thomas, Rt. Kn. Peter (Hendon, S.)


Lewis, Kenneth (Rutland)
Pink, R. Bonner
Thompson, Sir Richard (Croydon, S.)


Lloyd, Ian (P'tsm'th, Langstone)




Loveridge, John
Powell, Rt. Hn. J. Enoch
Tilney, John


Luce, R. N.
Price, David (Eastleigh)
Trew, Peter


MacArthur, Ian
Proudfoot, Wilfred
Turton, Rt. Hn. Sir Robin


McCrindle, R. A.
Pym, Rt. Hn. Francis
van Straubenzee, W. R.


McLaren, Martin
Raison, Timothy
Vickers, Dame Joan


McNair-Wilson, Michael
Ramsden, Rt. Hn. James
Waddington, David


McNair-Wilson, Patrick (New Forest)
Redmond, Robert
Walder, David (Clitheroe)


Maddan, Martin
Reed, Laurance (Bolton, E.)
Walker-Smith, Rt. Hn. Sir Derek


Madel, David
Renton, Rt. Hn. Sir David
Walters, Dennis


Marten, Neil
Ridley, Hn. Nicholas
Ward, Dame Irene


Mather, Carol
Ridsdale, Julian
Warren, Kenneth


Mawby, Ray
Rippon, Rt. Hn. Geoffrey
Weatherill, Bernard


Maxwell-Hyslop, R. J
Roberts, Wyn (Conway)
Wiggin, Jerry


Meyer, Sir Anthony
Rodgers, Sir John (Sevenoaks)
Wilkinson, John


Mills, Peter (Torrington)
Rossi, Hugh (Hornsey)
Woodhouse, Hn. Christopher


Miscampbell, Norman
Rost, Peter
Worsley, Marcus


Moate, Roger
Scott-Hopkins, James
Wylie, Rt. Hn. N. R.


Money, Ernle
Shaw, Michael (Sc'b'gh &amp; Whitby)



Monks, Mrs. Connie
Shelton, William (Clapham)
TELLERS FOR THE NOES


Monro, Hector
Sinclair, Sir George
Mr. Kenneth Clarke and


Montgomery, Fergus
Skeet, T. H. H.
Mr. John Stradling Thomas

Question accordingly negatived.

Mr. Charles Morrison: I beg to move Amendment No. 180, in page 112, line 34, at end insert:

'GROUP 14—FERTILIZERS

Item No.

1. Agricultural and horticultural fertilizers'.

The objective of the Amendment is merely to bring fertilisers into line with the other main purchases of farmers. Livestock, feeding stuffs and seeds of all food-producing plants are zero-rated, but fertilisers are not and that will produce a complication. In addition, this omission has produced the fear that there could be a substitution of purchase of foodstuffs for increased grass production stemming from greater fertiliser usage. Although VAT will be reclaimable the fanner may tend to favour the untaxed products, and this could mean that the food potential of farm production might not be reached. That would be a pity in view of the Government's intention—and very considerable encouragement—to increase production by the various means which have been announced from time to time by my right hon. Friend the Minister of Agriculture.

Many thousands of small farmers and growers have a taxable turnover of less than £5,000 and they would in principle be exempt from VAT. However, in order to recoup VAT on fertilisers they will have to elect to be taxable and then claim their repayment. Obviously this will require a great deal of extra paper work and as that paper work will serve no real purpose except to satisfy some administrative whim, and as it will take up more of the time of people already extremely hard pressed, it seems added reason for the zero-rating of fertilisers.

Furthermore, it should not be forgotten that the book-keeping of many small farmers is decidedly sketchy and amateur and is very often dependent upon occasional attention from an accountant or the local auctioneer. VAT registration and recoupment will obviously complicate that situation very considerably.

There is a precedent for my proposed zero-rating of which I believe my hon. Friend the Minister should take careful note. I am informed that only last month the Irish Republic decided to zero-rate fertilisers. I am sure my hon. Friend will agree that it would be invidious if fertilisers were zero-rated on one side of


the border and not on the other. Apart from anything else, it seems to me that if there were a distinction between the treatment of fertilisers on the one side of the border and on the other, farmers from the North would almost certainly purchase from the South and that would have a very sad effect upon the fertiliser firms in the north of Ireland.

In the light of these considerations, I hope that my hon. Friend will give very sympathetic consideration to the Amendment.

Mr. Higgins: I must, with the greatest respect, say to my hon. Friend the Member for Devizes (Mr. Charles Morrison) that he has perhaps made insufficient allowance for the way in which VAT operates. The first point which
one ought to stress is that our objective in zero-rating certain items of expenditure has been to take into account the impact which VAT might otherwise have on the lowest income families. It is for that reason that we have thought it right to give relief in respect of housing, fuel, fares and food. But it is important to stress that it is to food and not to farming that zero-rating has been given.
6.45 p.m.
Food production has been zero-rated, so that it will be possible through the normal operation of the VAT mechanism for the input tax to be deducted by those using fertilisers, and if a particular item of food production is zero-rated a net refund will be made to the fanner concerned. So there is nothing inconsistent in our view that food should be relieved of the tax but that fertilisers should be taxed, and the normal operation of the credit mechanism will in such cases apply.
It may be the case that fertiliser is used not for the production of food but for the production of, say, cut flowers. The House will recall that this matter was debated in Committee on the Floor of the House at very considerable length in the early hours of the morning, and I do not wish now to traverse again the many complicated arguments then put forward.
Cut flowers are not zero-rated, but again, if this were the case and fertiliser was taxed, the taxable trader who was producing flowers would be able to deduct

input tax on the value of the fertiliser. In this way again the tax will work along the mechanism until it comes to the final consumer. I therefore do not accept my hon. Friend's point about the possible distortion between this or that type of fertiliser.
My hon. Friend also spoke of exempt traders. Certain of those producing food may have a taxable turnover of less than £5,000—although I do not know that my hon. Friend suggested that there would be very many of them—but it is perhaps more likely that there are more below the taxable turnover limit among those producing cut flowers. In either case the position is the same as it is in all other areas of the tax. We have thought it right to draw the line at a certain point and we feel that the limit of £5,000, which is significantly higher than it is in some parts of the EEC, for example, is a reasonable point at which to draw the line.
But being below that limit has both advantages and disadvantages. The exempt trader cannot deduct input tax but he is not charged output tax. We have gone over this ground at very great length both here in the Chamber and in Standing Committee. The important point is that which my hon. Friend makes: that if someone wants to opt into the tax in order to deduct input tax, he has the option—and it is an option—of doing so.
My hon. Friend also referred to administrative problems. There is no administrative problem for the exempt trader because he is outside the scope of the tax anyway. Taxable traders are likely to be over the turnover level of £5.000, and in Standing Committee we went into considerable detail about the documentation that would be required. But although the Green Paper we published to bring out the principles of the tax followed a particular item along the production chain, it presented an overcomplicated picture in many cases because it is simply a question of the taxable trader at the end of the accounting period adding up output tax and adding up input tax, deducting the one from the other and showing the difference to the Customs. We do not envisage that the administrative problems will in this respect be anywhere near as onerous as my hon. Friend seems to think.
All that being so, 1 do not think there is any case for treating this particular input in any way different from the many other areas where VAT will apply. I therefore hope that my hon. Friend will feel able to withdraw his Amendment.

Mr. Brian Walden: There is no fertiliser in my constituency, or, if there is, it is not being besprinked on the beautiful green fields. I was interested in what was said by the hon. Member for Devizes (Mr. Charles Morrison) about the efficiency of production being affected. I am told, and I have no way of getting expert guidance except by talking to farmers, that there is fear that the tax might lead to some diminution of agricultural efficiency.
My other point I can put very quickly. What exactly is the position in respect of Ireland? I also had understood that north of the border there would be a situation rather different from that south of the border. There does not seem to be any particular reason why there should not be. However, it is an oddity. If the Irish can make a concession of this kind, why cannot we make it, especially as we have a broadly based, comprehensive and unanomalous tax?

Mr. Higgins: As I said, given the operation of the credit mechanism I do not believe that there will be a distortion of the kind that has been suggested.
On the Irish point, I gather that it has been suggested that the Republic of Ireland is planning to zero-rate some fertilisers. I am not entirely clear about the exact point my hon. Friend the Member for Devizes (Mr. Charles Morrison) has in mind and whether he is saying in some sense that such zero-rated fertilizers would be smuggled across the border or that they would come across the border in the ordinary course of trade.

Mr. Charles Morrison: In the ordinary course of trade.

Mr. Higgins: In that case it would be a question of the fertiliser coming in like any other import and the normal VAT rules would apply. But, also, the normal VAT tax deduction rules would apply in the same way as they will be used for other fertilisers—that is to say, if there was no tax charge there would not

be an input tax and the trader would not be able to deduct it; a registered trader could not deduct any credit for the tax charged.
If I have understood my hon. Friend's point correctly, I do not think that this is a problem. Subject to whatever may happen in the direction of harmonisation of rates and coverage of VAT within the EEC—this is a much wider question and the House has expressed differing views on both sides—there are a number of items charged in some countries at different rates from other countries. But that does not raise problems of the kind my hon. Friend has in mind.

Mr. Charles Morrison: My hon. Friend the Financial Secretary has dealt with the Amendment very sympathetically and with care and understanding. He seems to have confidence that no problems will arise from the fact that fertilisers are not zero-rated, in relation either to Ireland or to production patterns. I hope that my hon. Friend's confidence turns out to be well founded.
For that reason, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule 5

EXEMPTIONS

Mr. Nott: I beg to move Amendment No. 89, in page 114, line 2, after 'security', insert 'or secondary security'.
This is a purely technical Government drafting Amendment to correct a defect in the existing wording of Schedule 5, Group 5. I shall be happy to describe it to the House if it so wished.

Amendment agreed to.

Mr. Nott: I beg to move Amendment No. 181, in page 115, line 6, at end insert:
'(h) the register of dispensers of hearing aids and the register of persons employing such dispensers maintained under section 2 of the Hearing Aid Council Act 1968'.

Mr. Speaker: With this Amendment it would be for the convenience of the House to discuss Amendment No. 90, in line 6, at end insert:
'(h) the register of hearing aid dispensers kept under the Hearing Aid Council Act 1968'.

Amendment No. 91, in line 6, at end insert:
'(h) any person on the register kept under the Hearing Air Council Act 1968 who appears on the register by examination'.

Amendment No. 92, in line 7, at end insert:
'or registered hearing aid dispenser'.

Amendment No. 93, in line 7, at end insert:
'(h) the register of hearing aid dispensers kept under the Hearing Aid Council Act 1968'.

Mr. Nott: The effect of Amendment No. 181 is to exempt the supply of services, and in connection with it the supply of goods, by persons on the register of dispensers of hearing aids and the register of persons employing such dispensers maintained under Section 2 of the Hearing Aid Council Act, 1968.
As the House knows, my right hon. Friend felt that there was a strong case for relief in the medical sector. [HON. MEMBERS: "Hear, hear."] My right hon. Friend felt that it was appropriate in the case of the medical professions that the form that this relief should take should be exemption. The essential question in formulating the relief was to decide where, with a tax which in principle is comprehensive, the line should be drawn. We deliberately considered, in consultation with the Department of Health and Social Security, whether hearing aid dispensers should be within the scope of the exemption before the legislation was drafted. We took into account the fact that there was a statutory register of dispensers and that the treatment provided by hearing aid dispensers was subject to a strict code of practice.
However, as I explained in Standing Committee and in Committee of the whole House, we felt that on balance the hearing aid dispensers were not sufficiently akin to the other medical professions with statutory registers which we had decided to exempt. But this was a finely balanced position and, as I told the Standing Committee, we undertook to reconsider the arguments. In the light of the further discussions which my colleagues and I have had on this matter with the Department of Health and Social Security, we have decided that it would be appropriate to add the registered hearing aid dispensers to the list of professions in Schedule 5, Group 7, Item 1.
The Government Amendment applies to both dispensers and their materials. There are two registers under the Hearing Aid Council Act, one for qualified dispensers and one for employers of such dispensers. I should like to thank my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) and my right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton), and others of my hon. Friends including my hon. Friend the Member for Surrey, East (Mr. William Clark), who made points about this matter in Standing Committee.

Mr. Joel Barnett: What about us?

Mr. Nott: Hon. Members of the Opposition have been peculiarly ungracious and I shall not follow that bad example. I was about to thank the hon. Member for Willesden, West (Mr. Pavitt) for the comments he made and the help we received from him.
I am glad to say we have considered the matter as we promised, quite contrary to what was said by the hon. Member for Birmingham, All Saints (Mr. Brian Walden). I noted his words in Standing Committee but I shall not repeat them now. In spite of that, however, we are glad to make this change and I hope that it will meet with the approval of the House.

Mr. Laurie Pavitt: It would be extremely ungracious and churlish of me if I did not express the thanks of so many people to the hon. Gentleman and the Government for this concession.
I commiserate with the hon. Gentleman because this matter is extremely complicated. Audiology and otology are complicated matters. Even the Department of Trade and Industry at times has had to consult me about the meaning of my Ten-Minute Rule Bill. I commiserate with the hon. Gentleman in the problems he faced in Committee.
On behalf of so many hard of hearing people, the British Association of the Hard of Hearing and the Royal National Institute for the Deaf, and new organisations such as Breakthrough, I appreciate that this has been done and that the fine-edged decision has fallen on the right side of the edge.
I join in the expressions of thanks to hon. Members on the Government benches, particularly to the hon. Member for South Angus (Mr. Bruce-Gardyne), for conducting my Amendment in Standing Committee. I was not a member of the Committee. The hon. Gentleman stood in so valiantly and fought the case so hard that I wish to express my thanks to him, and to the Father of the House. I hope it will not be taken amiss if I also mention my hon. Friend the Member for West Lothian (Mr. Dalyell) and the rather difficult position into which he got in Standing Committee in using me from time to time as though I were in the box.
I hope that in other matters where the disabled, the deaf or the blind approach and pressurise the Minister from both sides of the House, he will extend as much sympathy as he has done on this occasion.

Mr. J. Bruce-Gardyne: We are in danger of becoming a mutual admiration society. However, I cannot allow the Amendment to go through without expressing my thanks to my hon. Friend the Minister of State and to my hon. Friend the Under-Secretary of State for Health and Social Security. They have taken an enormous amount of trouble over this matter. We have had a number of meetings with them and they have been extremely sympathetic. We have given them much trouble.
I am sure that my hon. Friends have come to the right conclusion. I am extremely grateful to them for that. I join with the thanks expressed to hon. Members of the Opposition and to my right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton). 
I hope that when next we sit in Committee dealing with a Finance Bill and one of my right hon. or hon. Friends urges one of us to withdraw an Amendment on the understanding that it will be considered before Report, we shall not be told by the Opposition that we are most unwise to take those words in the sense that they are meant. I hope that this will not be forgotten.
I thank my hon. Friend the Minister of State very much indeed for what he has done.

7.0 p.m.

Mr. Brian Walden: I join my hon. Friends in thanking the Minister warmly for the concession but I have a point to put which, though only marginally related to the Amendment, is of some significance.
In passing I must say that I feel hurt, neglected and unloved because the Minister did not thank me. However, there it is. When I said in Committee that the concession would not be made, I was of course fishing to get the concession then. [HON. MEMBERS: "Oh."] Of course. Then, when the hon. Member for Surrey, East (Mr. William Clark) told the Committee that a Conservative Minister would not betray his own backbenchers. I knew that we should win.
I come now to the point I wish to put to the Minister. I do not ask him to comment on it now; I want him to note it. I suspect that the difficulty arose, and we wasted a good deal of time in Committee on it, because these people come under the Department of Trade and Industry. I am certain that they should not. I suspect that what happened was that they just did not turn up on the list on which they should have appeared, the Department of Trade and Industry did not get in touch, or the Treasury did not get in touch—I am not apportioning any blame—and that is how it arose.
These people should not be under the DTI. I inquired how they got there in the first place and I was told that the real reason was that there was some thought that there might be State manufacture of hearing aids and, that being so, the DTI was thought to be the appropriate Department.
I thank the Minister sincerely for the concession. His decision will affect a considerable number of people. I add only that it might not be a bad idea if the Treasury had a word with the DTI and with the other Departments concerned and had the matter raised at such a level as to make possible the transfer of these people away from the Department of Trade and Industry, where they probably should not have been in the first place.

Mr. Dalyell: Like my hon. Friend the Member for Birmingham, All Saints (Mr. Brian Walden), on this occasion I am one of the unloved—and rightly so—


because, although I went on at inordinate length on this subject, I was able to do so in an informed way only because I was, so to speak, acting as ventriloquist for my hon. Friend the Member for Willesden, West (Mr. Pavitt).
I put a Question subsequently to the Lord President about facilities which should be available to the Opposition to use the Box for their advisers, and I received a very dusty answer. The truth is that I could not conceivably have argued the case, and replied time and again to the Minister, without the guidance and help of my hon. Friend the Member for Willesden, West, a member of the Medical Research Council and a man with expert knowledge and great general experience in these matters. I feel, therefore, that this is an instance which makes the case for the Opposition having facilities in the Box.
One can only say that this is one more example of the occasions when the Treasury, it seems to us, did not take the medical advice which is available to it in Alexander Fleming House and elsewhere. We had it with children's shoes. Sir George Godber was not consulted. We had it with telephones for the elderly. Sir George Godber was not consulted. Here, too, the Treasury got into trouble precisely because it did not see fit to obtain the medical advice which was available to it in other Government Departments.

Mr. Nott: May I have the leave of the House to speak again? Perhaps I should not have excluded the hon. Member for West Lothian (Mr. Dalyell) from my words of thanks, since he raised this matter in Committee and made some useful points.

Mr. Dalyell: Only through the assistance of my hon. Friend the Member for Willesden, West.

Mr. Nott: Perhaps I may add that my hon. Friends the Chief Secretary and the Fiancial Secretary have noted some remarks which he made recently in New Scientist. I shall not quote them. They were very pleasant. I am happy to reciprocate now and say that I wish him not to be left out.
I must, however, comment on the hon. Gentleman's observations about consultation between the Treasury and the

Department of Health and Social Security. He is quite wrong. There was the closest consultation, as I said, even before the Bill was published, between the Department of Health and Social Security and the Treasury on this matter. That consultation continued during the Committee stage and it still continues. The hon. Gentleman's observations on that matter are simply not accurate.

Amendment agreed to.

Clause 14

RELIEF ON SUPPLY OF CERTAIN SECOND-HAND GOODS

Mr. Higgins: I beg to move, Amendment No. 182, in page 11. line 20, at end insert:
'at the same rate as that at which the tax to be reduced would be chargeable but for the reduction'.
Perhaps it would be for the convenience of the House, Mr. Deputy Speaker, if we were at the same time to consider Amendment No. 183.

Mr. Deputy Speaker (Mr. E. L. Mallalieu): Yes, if the House so wishes.

Mr. Higgins: I am much obliged. I think that there is some danger that the air of euphoria which
has pervaded the Chamber for the last few minutes may continue on this Amendment, too. I may be mistaken, but I think that that may be so since this change also results from undertakings which my right hon. Friend the Chancellor gave in Committee on the Floor of the House. This matter is largely, though not entirely, related to the matter which wed is cussed yesterday regarding the scheme for second-hand works of art, though its scope is somewhat wider than just the provision of help in that particular regard.
Before I explain the Amendment itself, I must respond to a point which my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) made yesterday. He rightly took me to task for referring, for reasons of brevity rather than anything else, to the London art market, pointing out that I should have referred to the international art market based on London. I was only too ready to use that expression, but, as I left the Chamber after that debate, I was stopped by


another of my hon. Friends who said that there was altogether too much emphasis on London and there was a great deal of activity in the art market in his constituency as well.
I am now somewhat at a loss to know what to do, and I think that the best answer is to refer to "our international art market". That will be sufficiently comprehensive, I am sure. If, from time to time, I slip back by mistake to the expression "the London art market", I hope that my hon. Friend the Member for Bristol, West will forgive me.

Mr. Robert Cooke: It is certainly our art market, and we want to keep it so.

Mr. Higgins: Indeed, and we want it to remain ours. That is largely what motivated my right hon. Friend in giving consideration to a system for the taxation of works of art on the margins, out of which this Amendment has arisen.
During the discussions between Committee and Report, it became apparent that the vires in Clause 14, the Clause concerned with special schemes for second-hand goods being taxed on the dealer's margin instead of on the full value, needed adjustment to cater fully for the schemes for second-hand goods which were being developed.
I come now to the two Amendments. Amendment No. 182 deals with subsection (2) of the Clause. The current draft of this subsection does not cater for a change in tax rate between the first and second supplies—these are technical expressions—regardless of the goods concerned. This Amendment remedies that.
Now, Amendment No. 183. The proposed new subsection (3) will enable the special schemes to make provision regarding imports. This is required essentially for works of art but it is not restricted to them. It will not need to be exercised in respect of some items, such as second-hand cars, because they are subject to purchase tax now and second-hand cars will need to be taxed at import; but the powers may also be required if a special scheme is adopted, for example, for race horses.
The proposed new subsection (4) is designed to enable relief to be given to the supply of goods in a dealer's stock on

1st April, 1973. The original draft could have been thought to imply that the previous supply—using these terms in the sense in which they were used in Committee—had taken place at a time when the tax was in operation. The revised subsection avoids that implication.
The Amendment to subsection (5) is technical, arising from the proposal to make the tax on business cars non-deductible. I do not imagine that the House will wish to be wearied with the details of it.
We discussed this matter at some length yesterday. This is the consequential change, for the reasons which I stated yesterday, and I hope that the House will accept it.

Mr. Robert Cooke: I am grateful for what my hon. Friend the Financial Secretary said. Whatever phrase he decided to use we are at one on the matter. Perhaps "international art market based on Britain" would be the way of describing it. I hope that none of those who use the international market in Britain will be put off when they find, because of what they may regard as our slightly dotty domestic tax system, that we have to describe some of the great art masterpieces of the world, whether pictures, furniture or anything else as second-hand goods. I hope my hon. Friend will confirm that as a result of our domestic tax system no tax of any kind will fall on a work of art brought in from abroad for sale in London, and that the person who brings that work of art in will be able to enjoy the full proceeds of the sale as he does now, without let or hindrance.

Mr. Sheldon: Will the Financial Secretary say something about auction sales? He did not go into this in detail yesterday. If he is able to say a few words about it it would ease the minds of a number of people, because it is an important area within the whole problem.

Mr. Higgins: I do not wish on this Amendment to be drawn into broader questions which my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) has referred to and which I commented on in some detail yesterday, not least because the matter is not yet finalised, though we have every hope that there will be no difficulty in carrying a successful scheme into operation.
The hon. Member for Ashton-under-Lyne (Mr. Sheldon) asked about auctions. He will recall that at the end of my speech yesterday my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) intervened and asked about the position of auctions within the context of the whole scheme. I had anticipated his intervention and I used a precise form of words in response in regard to the relationship between——

Mr. Joel Barnett: Was it planted?

Mr. Higgins: It was not planted. I thought it might come up and the fairly precise form of words which
I used will be found embodied in my reply yesterday. I do not have that same precise form of words in front of me now. I hesitate to try to recapitulate it off the top of my head, because it was concerned with the effect which would arise in relation to a dealer being taxed on his margin at an auction. I refer the hon. Member to that answer and I hesitate to traverse that technical ground for the reasons I have explained.

Amendment agreed to.

Further Amendment made: No. 183, in page 11, line 20, at end insert:
vision for reducing the tax chargeable on the
'(3) An order under this section making pro-supply of goods of any description may include provision—
(a) for giving relief from the tax chargeable on the importation of goods of that description; and
(b) for securing the like reduction where no tax was chargeable on the importation of goods of that description as where no tax was chargeable on a previous supply of the goods.
(4) An order under this section may extend to cases where the previous supply or the importation took place before tax was charge able on any supply or importation.
(5) The preceding provisions of this, section shall, with the necessary modifications, apply in relation to cases where consequential relief from tax was given on a previous supply by an order under section 3(6) of this Act but the relief did not extend to the whole amount of the tax'.—[Mr. Higgins.]

7.15 p.m.

Mr. Joel Barnett: I beg to move Amendment No. 98, in page 11, line 23, at end insert:
'(4) Provided that the Commissioners shall ensure that no goods will be subjected to double taxation'

Mr. Deputy Speaker (Mr. E. L. Mallalieu): It will be convenient at the same time to take Amendment No.99, in page 11, line 23, at end insert:
'(4) Provided that the Commissioners shall make special arrangements to ensure that second-hand goods for which an invoice is available to prove that value-added tax has been paid shall only be subject to tax in respect of the further value added'.

Mr. Barnett: Amendment No. 98 deals quite specifically with double taxation and seeks to put into the Clause the fact that goods should not be subjected to double taxation. I know that is a principle which the Financial Secretary is not happy with. Amendment No. 99 deals with the problem of second-hand goods and the fact that they should not be taxed again. We have dealt with one aspect of second-hand goods in the case of original works of art, which is an odd way of describing works of art. In the debate in Standing Committee we were told that consultations were proceeding with the trade about second-hand cars and it would be interesting to the trade—if not exactly the people who are being consulted, then those who are not being consulted—to know just what is going on and how most dealers will be taxed on the margin.
Many hon. Members are concerned about the double taxation which would be involved in the case of stocks during the transitional period. The Co-operative Society is very concerned. I have said on many occasions that the Government have chosen completely the wrong scheme for stocks during the transitional period. On the large items of consumer goods they have agreed on a sale or return basis which will work very well. But there is a large number of other goods which are not to be treated in that way and for those there will be a short tax-free holiday.
If the tax-free holiday was long enough to cover, in the case of any given trade, the length of time in which stocks are turned over that would be fine. But we are told in practice that the tax-free holiday will be very brief. Inevitably that will mean that many retailers will be left with a large volume of tax-paid stocks. I have spoken to many retailers about this. Many of them were not aware of the problem. They thought that VAT did not affect them and when they heard about the problem we are dealing with here


their reaction was to say that they would ensure that their stocks next March would be as low as possible.
Therefore, inevitably orders from retailers to wholesalers to manufacturers from now on will be considerably reduced. I think this will have a disastrous effect economically and therefore I urge the Government to consider the other schemes that I and others have suggested even at this late stage for dealing with the transitional problem of double taxation on stocks. If they do not there could be serious economic consequences.

Mr. Alexander W. Lyon: My hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) has put his finger on a very real problem which certainly affects the major confectionary interests in my constituency and about which those interests have expressed very grave concern. They have made representations through their alliance to the Treasury. May we be given some indication of the nature of the tax holiday? If it is shorter than a month, the period suggested, it would be almost disastrous for the confectionery world and it would have particular effects, coming as it does at about the time of the Easter trade.
It is essential for the confectionery industry to begin planning for the Easter trade at about this time of the year, to begin manufacturing before Christmas and to send goods out for storage about next January. If those goods are sold with purchase tax and are put on the market after the introduction of VAT there is bound to be double taxation. There are two ways of avoiding that situation. The first is to pass on the double taxation in higher prices. That would have a serious effect upon sales and would have some effect upon the cost of living, which I am sure the Chancellor is anxious to avoid. The other way is to de-stock and then wait until the tax comes in before ordering again. That would have a calamitous effect upon the employment prospects of people in my constituency.
I am seriously concerned that at the present moment the industry has been given no assurance to enable it to deal with the problem. It is essential that it should know at an early stage whether it will be given a long period during

which the stocking up can go on or whether it must take alternative measures. One measure which has been suggested, and which I commend to the Financial Secretary, is that for those goods which by their nature will be sold after the introduction of VAT, such as Easter eggs, the invoices could be made out to that effect and used by the Customs and Excise as a test of the starting date for VAT, and that the goods should not carry purchase tax upon the original invoice but should carry VAT at the appropriate time of sale. That suggestion has been discussed to some extent under Clause 7, but it would be useful if the hon. Gentleman would say something about it at this stage.

Mr. Alfred Morris: I hope it may be said that, having regard to the importance of the subject, my intervention in this debate was one of spectacular brevity.
This is one of the few opportunities we have had so far to discuss the very serious threat of double taxation. The House will agree that both in principle and in practice it is wrong that traders should be faced with the possibility of double taxation. Together with the noble Lord, Lord Redmayne, Mr. Butler and Mr. Wood of the Retail Consortium, I recently met the Financial Secretary to discuss the fears of retail traders in this regard. It has been said that there is no question of introducing stock rebate schemes, because the Chancellor has rejected that. Therefore, let it be clearly understood that sale or return schemes are not stock rebate schemes. This was argued as recently as yesterday
at the Treasury, again by representatives of the Retail Consortium. Their arguments were utterly compelling, and I have seen no reply that comes anywhere near refutting them. 
I am certain that the Financial Secretary fully appreciates the concern throughout the retail trade about the threat of double taxation. The trade has a turnover of more than £15,000 million a year, and employs 2 million people in Britain. I know that the hon. Gentleman appreciates the seriousness of the point I am raising. He was extremely courteous to the hon. Member for Hampstead (Mr. Geoffrey Finsberg) and
to me and the representatives of the Retail Consortium


when we saw him. I hope that before the Report stage is completed he will be as constructive as he was courteous then.

Sir Robin Turton: I very much agree with what the hon. Member for York (Mr. Alexander W. Lyon) said about Easter eggs, and commend his suggestion that where the difficulty can be overcome by dated invoices, as with Easter eggs, this should be done. But the problem is much wider. I am particularly concerned with the clothing trade. In my constituency I have the offices of one of the largest manufacturers of clothing. The turnover in goods in that trade is on a three-monthly basis. The British Mantle Manufacturers Association, which is concerned about the matter, is recommending an arrangement for its members on a three-monthly basis.
I hope that when my hon. Friend the Financial Secretary replies to the debate, he will give us rather more hope than we have had in previous exchanges on the matter. It is a very serious problem. In the early part of next year there might well be a great slack in the retail trade, with damage to the economy, because of retailers' failing to stock up owing to the danger of double taxation. I hope that we shall have words of encouragement from my hon. Friend.

Mr. Higgins: I shall try to answer the various points raised in the debate. I say "various" because it is clear that although the Amendment is drafted in terms of double taxation it covers a number of different problems and concepts. Many of them were touched upon in Committee. We now have a fairly general agreement that the expression "double taxation" can mean a number of different things. I have expressed my view on both the principle and practice of the question on a number of occasions.
I should like to refer first to the case of the VAT and revenue duties being charged. That is a special case, the reasons for which are now well-understood.
The other case where it could possibly be argued that there is double taxation is that of second-hand goods. The hon. Member for Heywood and Royton (Mr. Joel Barnett) spoke about the margin schemes. We have already discussed at

considerable length such schemes with regard to works of art and antiques. There are two other areas where we have had representations that we should have similar schemes. One is motor cars and the other is racehorses. I cannot say more at this stage about the representations with regard to a special scheme for racehorses, although I think there are some areas of similarity with the scheme for works of art and antiques.
The scheme being worked out with the trade for second-hand cars is detailed, and would be very difficult to explain briefly now. Summarised very concisely, it effectively involves selling without tax invoices at tax-inclusive prices and keeping a special form of record of purchases and sales. That is based on proposals from the second-hand car trade. I understand that we are now at the point where agreement is being reached on it, and in due course we shall seek to make the proposals known to the House. They will come before the House in the form of an Order, which can then be debated. I hope that what I have said will go some way in meeting the point made by the hon. Member for Heywood and Royton.
The other matters which have been raised are all related to the question of purchase tax-paid stocks. I am in some difficulty here, because there is a later Amendment on this point, and I am a little uncertain as to how far the House would like me to go now and how far it would like me to go later. Perhaps I may summarise the position in the way in which it has been directly raised by hon. Members, and it may be appropriate to say a little more later.
The hon. Member for York (Mr. Alexander W. Lyon) raised the question in regard to purchase tax-paid stocks of Easter eggs, and it has been raised before. I was reasonably familiar with the problem then, and I am even more familiar with it now, because we have had discussions with the trade. There are some very real dilemmas here. There is a considerable variation of opinion between those who say that they want to be told the length of time and the date as soon as possible and those who say they want to be told the length of time and the date as late as possible.
There are good reasons why one view or the other could be taken, but whether


they always reflect the merits of a particular industry depend on the extent to which people have thought the matter through. We are giving deep thought to it. The length of time is crucial, because it is a question of providing a transitional period—I prefer that expression to "tax holiday"—within which purchase tax-paid stocks may be run down and stocks on which purchase tax has not been paid can be built up. But it is a fine judgment, and my right hon. Friend will give careful consideration to it.
7.30 p.m.
The other problem is that we are most anxious to avoid disruption of trade, but my right hon. Friend will need to take into account the economic situation as it seems to be developing in the period before the transition.

Mr. Joel Barnett: The hon. Gentleman says that he does not want to see a disruption of trade and he has spoken about the length of the tax-free period, or transitional period. There is a very considerable difference between trades. In the confectionery business, what is considered to be a long period is very different from that in a trade which turns over its stock, say, only twice or in some cases only once a year, such as ironmongers and pharmaceutical chemists' shops. Is the hon. Gentleman considering having different tax-free periods for different types of goods?

Mr. David Mitchell: To add to the list given by the hon. Gentleman, may I point out that, although some trades turn over their goods in 12 months, the fine wine trade turns over its goods once in five years? I realise that my hon. Friend the Minister cannot do much about that, but it is a problem.

Mr. Higgins: I note my hon. Friend's point and I am aware of his views on this fascinating topic. To reply to the hon. Member for Heywood and Royton, we are well aware of the different periods of stock holding which exist in trade and industry. I do not know that the representations made to us about what the period may be in a particular trade coincide precisely with such independent information as we have on this topic.
We have made it clear that we believe that there must be a single period, and I do not think it is possible to contem-

plate periods of different lengths. It is well known that there is no perfect solution to this problem. We gave immense thought to it before the Bill was introduced. My right hon. Friend thought that the right approach was to adopt the idea of a transitional period combined with arrangements in certain circumstances for sale or return. If the period is too short or too long, there will be a disruption of trade, and we are anxious to avoid that if we can.

Mr. Carter: The Minister mentioned the conflict of view among those in the confectionery industry about when they should be notified as to how long the tax holiday period would be. Can he say precisely who is now telling him that the holiday date should be announced at the latest possible moment? I understand from the Confectionery Alliance, and particularly from Cadburys, in my constituency, that there is unanimity of view in the industry that they want to know at the earliest possible moment how long the period will be. Who is telling the hon. Gentleman that it should be put off to the latest possible date?

Mr. Higgins: The hon. Gentleman misunderstands me. I was taking a broader view than the view he is taking. I was not saying that there was any difference of view in the representations from the confectionery industry. I am not able to guarantee that it is unanimous. But I accept broadly that the view expressed by the trade is that which the hon. Gentleman has just summarised. Some trades are not unanimous in feeling that they want the announcement to be made as soon as possible. We are giving careful consideration to this matter and we are continuing discussions with the trade interests.
The hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) referred to the representations which we have had from the retail consortium. There are two points here—the question of the length of the transitional period if it applies, and the question of sale or return arrangements. It would be appropriate for me to say something about the second item—I have already dealt with the first—but it would be more appropriate to do so when we reach the Amendment on the question of tax paid stocks rather than on this Amendment, which deals with a


more general question. I take it that this Amendment is what the hon. Member for Heywood and Royton would normally call a probing Amendment and that he wishes to have further clarification of the Government's position. I hope that I have clarified it. We are still engaged in consultations to ensure that, as far as possible, we make the transition from purchase tax and SET to VAT as smooth as possible.

Mr. Joel Barnett: I am obliged to the hon. Gentleman for the information which he has given about the way in which the tax will work in respect of second-hand cars. However, he will not be surprised to hear that I found his answer on the question of the double taxation of stocks entirely unsatisfactory, because he has chosen the wrong scheme. If he chooses a single short period, inevitably there will be a disruption of trade, which he says he wants to avoid, and double taxation. While it would be as well to deal with the main subject of stocks on the later Amendment, I find his reply on this Amendment entirely unsatisfactory.

Mr. Alfred Morris: I understand what the Financial Secretary said about deferring the main debate, but I hope that when he speaks again he will speak constructively on the points which I have raised.

Amendment negatived.

Clause 15

REFUND OF TAX IN CERTAIN CASES

Mr. Denis Healey: I beg to move Amendment No. 103, in page 12, line 34, at end insert:
'(m) a charitable body which is treated by the Board of Inland Revenue as being exempt for income tax or corporation tax purposes'.

Mr. Deputy Speaker: It will be convenient also to discuss the following Amendments:

No. 100, in page 12, line 32, leave out 'and' and insert:
'(kk) a charity giving aid to the disabled or handicapped; and'.

No. 101, in line 34, at end insert:
'(m) a charitable body which is not liable to selective employment tax'.

No. 102, in line 34, at end insert:
'(m) a charitable body which is registered with the Charity Commissioners'.

No. 104, in line 34, at end insert:
'(m) A body which has as its main aims the furtherance of religious education and instruction'.

No. 105, in line 34, at end insert:
'(m) a charity;'.

No. 106, in line 34, at end insert:
'(m) an amateur sports organisation'.

No. 107, in line 34, at end insert:
'(m) a youth club'.

No. 108, in line 34, at end insert:
'(m) the Y.M.C.A.'.

No. 109, in line 34, at end insert:
'(m) any organisation receiving a grant from the Arts Council'.

No. 174, in line 34, at end insert:
'(m) the Youth Hostels Association'.

No. 216, in line 34, at end insert:
'(m) a charity except insofar as it is engaged in the supply of goods (other than gifts) or services for the purpose of business'.

No. 110, in page 13, line 8, at end insert:
'( ) This section shall have effect in relation to tax chargeable on the supply of goods or services to, or on the importation of goods by, a body to which this section applies, being a charity, as if for the reference to any business carried on by the body there were substituted references to any (trade) (activities by way of trade) carried on by it'.

No. 111, line 8, at end insert:
'( ) In this section "charity" has the same meaning as in the Income Tax Acts'.

Mr. Healey: The purpose of these Amendments commands general support in the House and in the country. They aim at persuading the Government to give charities, churches, amateur sports organisations, youth organisations and organisations like theatres which get grants from the Arts Council the same privileges as the Government propose to give to local authorities, to the British Broadcasting Corporation and to Independent Television News—that is, to refund VAT which has been paid on goods or services supplied to them.
This is not, as The Times suggested in a leader which I otherwise wholly applaud, a problem which has suddenly come to public knowledge at the end of our discussions. The Chancellor of the Exchequer will be aware that the charities and churches have been discussing


this problem with him for, I imagine, almost a year. They published a paper on the problem in January and the Opposition tabled Amendments which were discussed at length in Committee upstairs a month ago. But the Government refused to budge.
We are glad that the Chancellor agreed the other day to meet one of the complaints made by the charities and churches by accepting the Opposition's Amendment in principle to ensure that sales by charitable organisations which belong to a national body were not aggregated for purposes of VAT so that they would not be required to seek a refund of VAT on the goods which they sold. This will be of great assistance to church bodies which raise funds by fetes.
There are still many charitable bodies which it would be difficult to disaggregate in the way the Chancellor of the Exchequer proposes, for example some of the charitable shops run by Help for the Aged and Oxfam which each week will have a turnover of £100, which is only £16 a day and, therefore, even if their operations are not aggregated with those of the parent body, will qualify for payment of VAT on their sales.
In one sense the concession made yesterday, which we welcomed, increases the problems for some charities, because they cannot recover the tax on their inputs if they are exempted by increasing the price of the goods which they sell or recover the VAT in that way. There are three burdens which still lie on nearly all the charities and which I hope the Chancellor of the Exchequer will find it possible to raise after listening to what is said in this debate.
First, there is the problem of the many charities whose activities largely rely on selling goods to the public, for example Oxfam, Help for the Aged and many other such organisations which run permanent shops from which the public can buy goods. Many of them will have a turnover which is above the limit set for exemption, and they will not be helped by the concession of disaggregation announced yesterday. I believe that they deserve more consideration than the Chancellor has yet given them.
Secondly, the problem of the inputs on which charities still must pay tax is a

serious one in two respects. A minor problem is that they must pay tax even on gifts of money, goods or services if those gifts are made by taxable persons like firms and are worth more than £10. I do not suggest that this is a great problem but a firm may, for example, give a charity a car, a washing machine or a refrigerator for a sale. Under the law as it stands somebody will have to pay to the Exchequer 10 per cent. of the value of that gift. One might hope that the donor would pay the tax but one cannot be certain of it. It may be said that purchase tax works in the same way, and of course it does for new goods, but people often give second-hand goods for sale and purchase tax does not apply to second-hand goods. I do not suggest that this is a major problem, but it is a genuine one and I think the Chancellor will agree that it deserves consideration.

Mr. Carter-Jones: Disaggregation may be an advantage to the charity, but will it not substantially increase administrative costs?

Mr. Healey: The amount by which it increases administrative costs depends entirely on the final form of the proposal which the Chancellor brings forward.
When we discussed this earlier, it was common ground that if the Chancellor had not agreed to disaggregation the charities would have been compelled to disperse their activities by changing their constitutions and acting in a different way. That would certainly have increased administrative costs and it was one of the factors which led the Chancellor to make the concession. He will be the first to admit that he has problems in finding a way to disaggregate these operations, and until he can tell us precisely how he proposes to do this we shall not be able to assess the full value of the concession which he has made.
7.45 p.m.
A far more serious problem than the imposition of VAT on gifts to charities, both new and second-hand, by taxable persons is the 10 per cent. tax which the charities will have to pay on essential goods or services which are supplied to them to enable them to operate. This is a serious problem as I am sure the Chancellor recognises.
Last night we debated one aspect of that problem when we discussed relieving churches and historic buildings from the payment of VAT on repairs and maintenance. The miserable speech with which the Financial Secretary sought to persuade the House that it was impossible for the Government to make an exception for churches without excepting all repairs and maintenance totally failed to commend itself to the House. When he sought to suggest that the whole fabric of the relationship between Church and State would collapse in ruins if he accepted the Amendment, we felt that the hyperbole was a little excessive. He could perfectly well have accepted the Amendment. We have all known, ever since Professor Cornford wrote "Micro-cosmographia Academica", that the "thin end of the wedge" argument is always used against change, but only the day before the Financial Secretary in accepting an Amendment to relieve hired television sets of tax had maintained that he could do so without extending the concession to hired radio sets or hired Xerox machines. I suggest—and the hon. Gentleman knows this in his heart—that he could perfectly well have accepted this Amendment, which would not have required him to extend the concession to anybody else, but he did not do it.
It is not only a question of the repair and maintenance of church buildings. A great number of charities have to pay for a large range of goods and services to enable them to operate. This applies to sheltered workshops, rehabilitation centres, day care centres and so on. Many of these organisations have given estimates of the additional burden which VAT will impose on them compared with the burden that previously fell on them from the taxes which it replaces. The churches have pointed out that they will have to pay 10 per cent. extra on repair bills for cathedrals, churches, chapels, parsonages and manses, and for the first time they will have to pay 10 per cent. on the professional advice they receive on their office expenditure. The VAT extends into areas which may seem to hon. Members to be fairly trivial but which to a poor parish are substantial.
For example, ecclesiastical furniture is at present relieved of purchase tax but no similar relief is allowed for VAT. The result of all this is that the churches

believe that a large additional cost will fall upon them—and nobody who has talked to those responsible for the financial administration of the churches can regard them as in any sense amateurs in the understanding of their economic problems; far from it.
The churches estimate that if VAT is imposed on their inputs it will cost them £1¼ million a year more than they are now paying. The Church of England thinks it will cost it £800,000 a year more, or for the average parish church £200 a year more. Those of us who know the problems of the churches will recognise that this is a very heavy sum, particularly for some of the country parishes, and indeed for some of the poorer areas of the cities, to have to carry.
The Methodist Church calculates that VAT will cost it £500,000 a year extra, the Roman Catholic Church reckons that it will cost it about £250,000 extra a year, and similar burdens are likely to fall on charities other than churches. Dr. Baranardo's Homes reckons that VAT will cost them an extra £50,000 a year. The Spastics Society say that VAT will impose an additional burden of £30,000. The British Legion, an organisation for which at one time I had a certain responsibility, estimates that VAT will increase the cost of producing poppies for Poppy Day by £16,000 by taxing services provided by ex-servicemen or disabled people who work at their two factories for this purpose.
It is not only cruel but absurd to load those extra burdens on these charities. In most cases the charities are simply filling gaps in work done by local authorities, and local authorities will have their VAT inputs refunded under the Bill.
When we discussed this matter at some length upstairs in Committee the Financial Secretary gave firm reasons for rejecting our proposals. He first attempted to argue that VAT was simply replacing purchase tax and SET, implying that the one was very much like the other. But the impact of those taxes on charities and the churches was infinitely less heavy than will be the impact of VAT. These matters have all been pointed out in letters sent by various organisations to Members of Parliament and to the newspapers. Purchase tax covers a much smaller range of goods and is not imposed on second-hand goods. Oxfam pointed


out only this week that the impact on its operations of the halving of SET was not perceptible, and most people who are not charities would say that the impact is very much the same.
The Financial Secretary dropped the argument without elaborating it too much and rested his case mainly on the contention that the Government had this year given charities and churches certain other concessions whose value to them far outweighed the burdens imposed by VAT—namely, the concessions relating to estate duty and capital gains payments on gifts to charities.
The concessions on capital gains and estate duty will substantially help some charitable organisations, and this certainly applies to those which depend on legacies, such as the British Museum and the National Trust. However, they will not help those charities which are most affected by VAT because those organisations benefit very little from legacies or gifts which are large enough to be affected by the concessions already announced by the Chancellor of the Exchequer.
The charities rightly argue that these concessions—and I give credit to the Chancellor for making them—are required not as an offset to the burdens of VAT but as a necessity if they are to continue to operate and as a matter of justice. It is no good the Chancellor saying "We may be imposing a burden by VAT, but we are removing it by making these other concessions". He sought and got credit for these other concessions because they were justified in their own right, but many of these charities will not benefit significantly from the estate duty and capital gains concessions.

Mr. Peter Hordern: This is an important point. The right hon. Gentleman appeared to be suggesting that charities would require this treatment in respect of bequests and capital gains tax. In view of the appearance of the Labour Party programme dealing with future treatment of wealth tax and gifts tax, will the right hon. Gentleman give an undertaking that in the up happy event of a Labour Government being returned to power in future there will be no question of either a gifts tax or any change in the suggested treatment of bequests of £50,000 in terms of capital gains?

Mr. Healey: I am delighted that the hon. Gentleman has such confidence in a Labour victory in the near future that he is now spurred to ask for more information. I will take the earliest opportunity to put personally on the board a copy of the document to which he referred. I can give him the assurance that while a wealth tax would hardly affect charities, a gifts tax certainly would. It would be my intention, if I were in a position to do so, in introducing a Bill on gratuitous transfers to ensure that charities were as a result no worse off.
Some of the most worthy charities, those which are doing the most important work, are those which tend to be least attractive to the big donors. I shall give two examples from the churches. The Church of England Council for Social Aid—which specialises in frontier work for the young people, for those coming out of prison or borstal or for alcoholics—had an income last year of about £10,000 in subscriptions and special gifts but received only £100 from legacies. I fear that drunkards are not all that popular, nor are ex-prisoners. The National Trust and the British Museum can sometimes benefit enormously from the generosity of the wealthy, but some of these other very important charities benefit very little.
To take another example, the Church of England Children's Society gets some legacies but 80 per cent. of them are for sums of £500 or less and about 17 per cent. are for sums of from £200 to £2,000. Only 1·4 per cent. were for sums of £5,000 or over. In other words only 1½ per cent. are likely to benefit from these concessions.
At the same time as the Chancellor made concessions to charities, he also imposed a new burden upon them. The unified personal tax system means that charities
which receive gifts through bank orders and covenants will recover tax at only 30 per cent. instead of at 38·75 per cent. It has been estimated that this will cost them about £4 million a year.
The Chancellor of the Exchequer will be the first to admit, as the Financial Secretary did yesterday, that it is totally impossible to quantify even the global benefit to charities from the concessions.


on capital gains and estate duty because no one can tell precisely how they will influence the pattern of gifts and legacies. The Financial Secretary made a great deal of that yesterday.

Mr. Albert Roberts: If these charitable organisations cannot continue, what will be the result?

8.0 p.m.

Mr. Healey: Obviously some charities will be compelled to cease operating, because they will not be able to cover their administrative costs. That is the fear of many charities in relation to the VAT.
The Financial Secretary pointed to the case of the Spastics Society which this year, according to him, was gaining almost as much from the additional reliefs through the capital gains and estate duty provisions as it was likely to lose in VAT on its sales and inputs. But there is no guarantee that it will be as lucky next year, and we can be certain that many charities will not be as lucky.

Mr. Bruce-Gardyne: Surely the whole point is that if the fiscal system as it applies to gifts to charities is changed, it is a logical expectation that the yield which the charities will obtain from such legacies will be increased and that they will be encouraged to seek out such legacies.

Mr. Healey: That is true, of course. With respect to the hon. Member for South Angus (Mr. Bruce-Gardyne), however, logical expectations "gang aft agley". We have had so many logical expectations from the Chancellor of the Exchequer. Every time he presents a Budget he tells us with confidence precisely how it will affect the pattern of production, the yield of taxation and so on. Every time he has been wrong. I do not altogether blame him for being wrong. But for the hon. Member for South Angus to pretend that one can predict exactly how a change of this nature will affect the receipts of charities which depend so much on the caprice of a handful of very wealthy men is to make a pretence which has no foundation.
The Chancellor of the Exchequer has been in a somewhat generous mood this week. In Committee he made almost

no concessions. But they have been dribbling out of his cornucopia like golden coins at the rate of three or four a day since the Report stage began. He has done a good deal for auctioneers. He has done quite a lot for art dealers. He has done a great deal for television addicts. In the latter case he has sacrificed £20 million, and rightly so, because we pressed him to do it. He has relieved lotteries and the gambler entirely of the burden of the VAT. The cost of meeting the churches and the charities completely on this issue is only £1½ million. I do not think the right hon. Gentleman can deny that of all causes in the country it would be impossible to find a more deserving one for his generosity.
I am sure the right hon. Gentleman will say that the Amendment which has been selected for the House to vote upon is defective in its drafting. We drafted it in this form only because we did not think that it would be selected if we tabled the same Amendment as the one we debated in Committee, which was less defective. But I am not pressing the right hon. Gentleman to accept the Amendment in these terms. I ask him to accept the case in principle and to return to charities their inputs, in the same way as he is relieving Independent Television News and the British Broadcasting Corporation. He has power to do this by order under subsection (3)(l). He does not need to come to the House with an Amendment. He simply has to publish an order—he can tell us that he will do it this very evening—to include charities, defined as he thinks fit in the light of the problems among those bodies, which can obtain refunds of the VAT paid.
If compassion and logic will not move the right hon. Gentleman, is there no other motor which might stir him into action? I remind him of the words of his hon. Friend the Member for Belper (Mr. Stewart-Smith) in the debate on children's shoes. The hon. Gentleman said:
There is also a stark political issue here. We cannot afford another school milk scandal for the sake of £12 million. In Group 4 of the Schedule the Government are exempting from the tax facilities for gaming and lotteries. It seems extraordinary that the Government should exempt them but not children's shoes."—[OFFICIAL REPORT, 16th May, 1972; Vol. 837, c. 294.]


The charities are quite as deserving as children's shoes, and the cost of meeting their requirements is only £1½ million. That is little over 10 per cent. of the cost of meeting the needs of the children which the right hon. Gentleman went a little way to do in the concession he made on 16th May.
I think that I speak for many hon. Members on both sides of the House when I ask the Chancellor to take the opportunity offered by subsection (3)(l) to make an honest man of himself, to remove this cloud from the reputation of a Government whose reputation is already very murky and to tell us that he is prepared to add one more concession to those he has made to the Opposition during the past three days.

Mr. Hordern: The right hon. Member for Leeds, East (Mr. Healey) approached this matter very seriously. His speech was a serious contribution to a topic which has concerned very many people, as the correspondence in the national newspapers have shown for some time past. I am sure that every hon. Member has a deep and personal interest in either a group of charities or a specific charity. I speak as a director of a national charity, and I know the concern that the charities feel about the proposal that VAT should be charged on them.
One of the difficulties about this proposal is that all estimates by definition are somewhat imperfect. It is extremely difficult to make any accurate forecast either of the weight of the VAT that the charities will have to bear, or of the total effect on charities taking into account the benefit that they will receive by legacies and that from the capital gains concession which has been granted by my right hon. Friend the Chancellor of the Exchequer.
I turn first to one or two of the points that the right hon. Member for Leeds, East made at the outset of his speech since they illustrate some of the difficulties that the House has to face in looking at this matter. The right hon. Gentleman referred to the input tax and to gifts of new articles, such as cars and and television sets, and of second-hand items.
I thought the proposition being made by the right hon. Gentleman was that it was extraordinarily unfair that charities

should have to bear a tax on gifts. However, the right hon. Gentleman seemed to suggest that people who are disposed to give gifts to charities will say, "We will give you the value of the gift, but we shall deduct the VAT input on it." In practice, that is a most unlikely proposition. I hope the right hon. Gentleman will accept that, whatever else may be true or untrue about that matter, people who are generously going to give gifts to charities will not at the last moment be mean enough to deduct the VAT from them.

Mr. Healey: I should hope that it will not be the general practice. However, I know of some charities and charitable givers who are capable of behaving in that way. If the donor deducts the money it is true, as the charities argue, that this is another 10 per cent. devaluation of the £ for them, because the value of what the donor is giving will be only 90 per cent. of what it would have been had he not been compelled to pay this tax.

Mr. Hordern: This illustrates the dilemma in which the House and, indeed, these charities are placed in trying to guess at the propensity of people to make gifts to charities and the marginal effect the imposition of VAT will have. I do not think it is proper for either the right hon. Gentleman or the charities to make this kind of precise and apparently logical estimate, because I do not think it is conceivably possible to do so.

Mr. Bruce-Gardyne: Surely the point is that the kind of gifts we are talking about now, the more expensive things like washing machines, cars, and so on, will have borne purchase tax in the past, so the donor, according to the right hon. Gentleman, will have had his gift devalued by purchase tax.

Mr. Hordern: I was coming to that point. The right hon. Gentleman referred to the purchase of essential goods. He knows that if the goods are new, in the majority of cases they will already have borne purchase tax. Many charities depend, if not wholly at least in considerable part, on the buying of Christmas cards and gifts of that kind. The right hon. Gentleman knows that the Labour Government raised purchase tax from, I think, 40 per cent. to the top rate of 55 per cent. on greetings cards.


So, concerning both gifts and the purchase of essential goods and services, we must recognise that both purchase tax directly and selective employment tax indirectly were and are now charged on charities. I hope my right hon. Friend will tell us something about this matter when he winds up this debate. It would be interesting to know whether any estimates have been made about the total effect of the imposition of purchase tax and SET being paid by suppliers to charities compared with the projected payment of the value added tax.

Mr. Healey: The hon. Gentleman should know that the figures I quoted of the cost of value added tax to charities, which were estimates made by the charities themselves, were net of purchase tax and SET. If he wishes, I can also put their calculations on the board.

The Chancellor of the Exchequer (Mr. Anthony Barber): I should be grateful to know where the figure of £1½ million comes from.

Mr. Healey: The figure of £1½ million is given by the Churches' Main Committee. It is the addition, roughly speaking, of the three figures I gave for the Church of England, the Methodist Church and the Roman Catholic Church. I quoted the separate figures for each. They are all figures provided by the Churches' Main Committee, whose financial advisers are, I suspect, as expert as many of the Chancellor's advisers.

Mr. Hordern: Perhaps I may be allowed to continue my few remarks. What the right hon. Gentleman said was very interesting. I have read those figures, but I do not believe any accurate estimate can be made of the amount of SET paid by the suppliers either to charities or to the churches. It is extremely difficult to know how any precise estimate can be made.
8.15 p.m.
I may be wrong, but listening to the right hon. Gentleman mentioning the estimates made by the Church of England, the Methodist Church and the Roman Catholic Church, I thought that in total they amounted to rather more than £1½ million. That is a small point which can easily be checked.
The important point is that here is a great area of uncertainty. The churches and the charities have put forward certain figures, but, by the nature of the matter, there is a great deal of uncertainty, and anything which can be done to resolve it to make a more precise estimate possible would be extremely useful. I hope my right hon. Friend will be able to do something in that regard.
The right hon. Member for Leeds, East referred to small charities. I have seen an estimate—the hon. Member for Heywood and Royton (Mr. Joel Barnett) mentioned it upstairs in Committee—that 94 per cent. of all charities will be under the £5,000 limit, which means they will be exempt altogether from the charge. This figure could be improved upon by the announcement made yesterday by my right hon. Friend concerning the branches of national associations. It will not be very long—I shall be surprised if it is—before the ingenuity of the branches of national associations makes itself felt. There are many branches of Oxfam all over the country. I shall be greatly surprised if there are not many more, after the concession announced by my right hon. Friend yesterday, so that they can come within the £5,000 limit.
Many branches of charities are somewhat puzzled about the tax on outputs. I am sure it is not their fault, but they seem genuinely impressed with the view that it is they who have to bear the charge. It is not. It is the purchaser, the buyer, of anything the charities sell who has to pay the charge.
We move now into an area of real uncertainty. Some of the charities, and certainly the churches, have been arguing that because the purchaser will have to pay an extra 10 per cent., by a close calculation they can show how their turnover will be affected. I do not believe any such close calculation can be made. It depends mainly on the propensity of people to give and by how far they will be affected at the margin by an extra 10 per cent. on the charge. Anybody's guess is good here. I think it is impossible to be precise about the propensity of people to be generous. I hope that nobody will try to be precise about that. If, as I believe, 95 per cent. of all charities will be outside of the scope of the charge, we are left with 5 per cent. who will not.
We must consider the real position. My right hon. Friend in his Budget has given an exemption or allowance for estate duty up to £50,000 for bequests to charities. That was an extraordinarily generous measure, the importance of which has not yet been properly taken in. My right hon. Friend thought that the cost of this concession would be £15 million. I do not know how these estimates are made. I have spent all my working life in the City looking at estimates. The more I see of them, the less able I am to go along with that kind of estimate. My guess is that it will be a good deal more than £15 million, because what has to be evaluated with the concession of the bequest is the concession of the capital gains allowance. This is important, because the people who give large bequests to charities do not have a lot of money in the bank; they have it carefully invested in stocks and shares, often in their own companies. There is and has been a real problem for those people. If they want to give a large gift of cash to a charity they have to dispose of the shares, and capital gains tax, generally very large indeed, is payable.
The problem does not end there, because once they have sold the shares and raised the money they have to sell more shares to pay the capital gains tax, and in doing that they have to sell yet more, and the process goes on for a long time. I must tell my right hon. Friend that the position has been completely transformed not only by the concession on bequests, but in particular by the capital gains concession. I do not know what they amount to together, but I should be surprised if it were not a significantly larger sum than £15 million.
The 5 per cent. of charities, most of which are national organisations, extremely well run and often professionally managed, will know exactly how to take advantage of these concessions. Sticking to the 5 per cent. of charities which fall outside the £5,000 exemption, I shall be greatly surprised if they do not benefit to a considerable extent. It is almost as certain as can be that the overall effect of these concessions—and that is the matter with which the House must be concerned—will on balance be to benefit them far more than the cost to them of VAT.
That is what my right hon. Friend said during his Budget speech, but I think that the House is entitled to ask my right hon. Friend to take the matter a little further and, after the operation of the charge of VAT for one year—or any reasonable period which he may think proper—see what the effect is on the size of the legacies they are getting, and also the effect of the capital gains relief.

The whole House is concerned that there should be no overall charge on charities. In my opinion there can be no charge on them, because the great majority will be outside the charge and the few that will remain within the charge will greatly benefit from the concessions made by my right hon. Friend.

Mr. Dalyell: I should like to follow the line of thought of the hon. Member for Horsham (Mr. Hordern) and take direct issue with him on the question of estate duty and express disbelief in the argument about swings and roundabouts. In so doing I am crossing the "t's" and dotting the "i's" of the brilliantly deployed speech of my right hon. Friend the Member for Leeds, East (Mr. Healey).
I am cynical about this, because I think that people leave major bequests to those charities which, in a sense, can be memorials to them. Of course people leave money to the National Trust because they will be remembered. They may leave money to the church for good reasons or for what some might think are not good reasons. Nevertheless, there is an element—I put it no higher—of leaving money to institutions by which they will be remembered.
It is different for those who depend on current expenditure. Charities such as
Oxfam which will not perpetuate the
memory of the person who leaves the bequest into the 21st century suffer more than those who can give some guarantee of a memorial. This may be a cynical view of what human beings do with their money, but it is true, and it is relevant, because it accounts for the difference between some favoured charities which receive a great deal of money from estate duty, and will receive large bequests, and those which get almost none at all.
I should like to be specific. Yesterday when I raised this matter I was interrupted by the hon. Member for Twickenham (Mr. Jessel) who said:
Is it not incorrect to analyse the last five years and project the result into the future? Does not that method fail to allow for the dynamic effect of any change resulting from the Budget which might cause more people to leave legacies to charity.
I should not have dwelt on this when there are so many others who wish to speak had it not been for the fact that the Chancellor said:
Although this is not the occasion to go over this particular aspect again, I say in passing that I agree entirely with the intervention of my hon. Friend the Member for Twickenham (Mr. Jessel), who put the matter very fairly when he spoke about what this would mean to charities. One cannot just look back over the past. Obviously it is bound to have an effect on people's intentions in the future."—[OFFICIAL REPORT, 11th July, 1972; Vol. 840, c. 1433–9.]
I wish I thought that that were true. It may be that the Chancellor is right, and that as it affects the National Trust, and perhaps the churches, there will be an uplift in the number of bequests, but I do not think that it will in any way benefit those charities which are organs of current expenditure and which provide no means by which those who give huge bequests are remembered by their grandchildren and great-grandchildren.
I am sorry to be cynical about this. If I am wrong, it behoves the Treasury to produce some evidence, because this debate is taking place in almost a vacuum of fact. We do not have sufficient facts, and until we get some concrete evidence that a substantial number of charities which are users of current expenditure and pay out this year or next year will be benefited on the roundabouts, we may be forgiven for thinking that what they lose on the swings will be a great deal more
I should like to ask two factual questions. The first concerns this matter of disaggregation. As my right hon. Friend said, it is true that there are a number of what we might think are small charities which have a turnover of more than £16 a day. In fact, there are many which would not be in business at all if their turnover from gift shops was not greater. What calculations has the Treasury made of the effect of giving them this Amendment? Surely, after recognising that this

is an important Amendment, we can be given some figures?
My next question relates to taxable gifts of more than £10. Has any calculation been made of this? How often do charities depend on motor cars, on washing machines and on various kinds of consumer goods which cost well over £10! Indeed, it may be thought to be a bit mingy if a prize is under £10. On the whole charities depend heavily on these consumer goods, even fairly modest consumer goods which are over £10. Again we must ask what calculations the Treasury has made. We cannot sensibly continue the debate in the absence of fact.

Sir Derek Walker-Smith: I am sure that most of the country as well as most hon. Members will share the view expressed by my hon. Friend the Member for Horsham (Mr. Hordern) in his admirable speech, that there should be not net adverse effect on charities from the fasciculus provisions made in this context. They would probably not express it as happily as my hon. Friend did in that phrase, but there is a considerable volume of disquiet, as we see from the columns of the newspapers, from the leader in The Times this morning and, if other hon. Members are in the same position as myself, from a good deal of communication from constituents. One is always glad to have communication from constituents, especially when the matter raised is not of their own immediate personal interest but on this wider and sympathetic matter.
8.30 p.m.
There seems to be difficulty about whether it is possible to come to a precise evaluation on the facts, and whether it can be said that they balance out so that there is no net adverse effect. The hon. Member for West Lothian (Mr. Dalyell) referred to there being a vacuum of fact. That is perhaps putting it a little too high, but it is true that there are a number of imponderables and imprecisions regarding the estimates which can be made.
Broadly, the proposition that there would be no net adverse effect depends on the assumption that the benefits accruing from the estate duty and capital gains concessions and the disaggregation concession, which are all welcome, mean that


charities would not be in a worse position because VAT in any event is a substitute for purchase tax and SET.

Mr. Dalyell: One of the difficulties of that assumption is that the term "charities" is generic and tends to be rather less than meaningless. The Treasury may be right regarding one set of charities, but, referring to the charities which have a current income, the truth is that people are unwilling to give money, for instance, to look after Bangladesh today when it might be an issue which is forgotten in a year or 10 years' time.

Sir D. Walker-Smith: I was coming to that point. What is true of one form of charity may not necessarily be true of another, more particularly in the context of legacies and gifts, for reasons which are apparent. But even there we are, to some extent, dealing with un-predictabilities as to the form which the generosity of testators and donors will take. I accept that there is some substance in the hon. Gentleman's point, and it was apparent in The Times leader of this morning.
The other possible point of difficulty which I found is the proposition which my hon. Friend the Member for Horsham gave of the number of charities which would not be affected by reason of coming under the £5,000 limit. I was somewhat surprised, and perhaps I was not alone, that the figure was as high as 95 per cent. My hon. Friend did not precisely indicate the basis for that figure. I would willingly give way, because this must be a matter of great interest to many.

Mr. Hordern: The estimate comes from Oxfam.

Sir D. Walker-Smith: The combination of the authority of Oxfam and my hon. Friend is impressive.

Mr. Healey: I hope that the Chancellor of the Exchequer will take this point. The advice given by Oxfam related to the effect of VAT on outputs, especially given the disaggregation. However, all the exempted charities will pay on their inputs and will not in any way be affected by the concessions which the Chancellor makes.

Sir D. Walker-Smith: My hon. Friend thinks that the number constituting the

95 per cent. would be the same. If that be so, it means that the residue of the 5 per cent. is likely to benefit from the other concessions which my right hon. Friend has made.
That puts a more favourable complexion on the position of charities at the end of the day in seeking to see whether there would be a more adverse effect than is generally apprehended. I hope that my right hon. Friend will seek to do anything further that he can for the amelioration and assistance of charities in this respect and that he will have in mind the adjuration of my hon. Friend the Member for Horsham that he keeps this matter under review, if no Amendment is accepted, so as to see that charities do not suffer in a way I am sure they were not intended to and in which I am equally sure British public opinion would not wish them to suffer.

Mr. Alfred Morris: These are deeply important Amendments and they have been admirably, as well as powerfully, introduced by my right hon. Friend the Member for Leeds, East (Mr. Healey). I rejoice that there are so many right hon. and hon. Members in all parts of the House so strongly in support of the principle at stake in this debate. The Amendments are of concern to millions of kindly people in every part of Britain who contribute to the immense volume of charitable work that is done in this country.
My principal concern is with Amendment No. 100, standing in my name and the names of other of my hon. Friends. It says:
Page 12, line 32, [Clause 15], leave out 'and' and insert:
'(kk) a charity giving aid to the disabled or handicapped; and'.
I was at the Treasury yesterday meeting the Financial Secretary with my hon. Friend the Member for Eccles (Mr. Carter-Jones) and the hon. Members for Newbury (Mr. Astor) and for Exeter (Mr. John Hannam). We introduced the Financial Secretary to distinguished representatives of the Central Council for the Disabled, the National Fund for Research into Crippling Diseases—or Action for the Crippled Child as the fund is sometimes known—the Spastics Society, Oxfam and Dr. Barnardo's. The Financial Secretary showed all his customary kindliness and understanding towards the deputation.
I hope that, when the Chancellor comes to reply, that kindliness and understanding will be given practical expression in an agreement to accept the principle argued by my right hon. Friend. We expressed concern about the future of sheltered workshops. Value added tax will need to be added to the invoice value of goods sold by sheltered workshops, because there are no provisions for special relief. These workshops are already unable to compete with open industry and the imposition of VAT, bringing with it an inflation of the prices of goods made by the disabled, will clearly affect the already serious incidence of unemployment among the disabled.
The unemployment figure among the employable disabled is 14·9 per cent. In the region represented by the Chancellor and myself, among others, the figure is 16·3 per cent. Why should we deliberately make worse, or do anything which may make worse, the condition of disabled people who passionately want to work and are denied the opportunity? Even the figure of 16·3 per cent. unemployed among the employable disabled in the North-West understates the seriousness of the problem. Today there are large numbers of disabled people who have lost all hope of ever again obtaining work. They are afflicted by a sense of hopelessness and despair. They crave the right to work. They want to be as normal as possible and it is part of normality to earn a living. I have met few disabled people who want to be supplementary pensioners. All of the disabled with whom I am in contact want to be taxpayers.
I appeal to the Chancellor of the Exchequer to look carefully at the effect of imposing VAT on sheltered workshops. Why tax voluntary work and voluntary organisations? Why make life more difficult for those who lead our charities?

The many ways in which charities will be adversely affected by VAT were dealt with in detail by my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) when he moved an important Amendment to Clause 15 in Standing Committee. I pay tribute to the care with which my hon. Friend prepared his case. As we explained to the Financial Secretary yesterday, that Amendment was regarded by charities everywhere as one of real importance.
There is no need for party animus on Amendments of this kind. The right hon. Gentleman himself must have a personal concern to do what he can to help a number of charities. Thus I hope that he will not enter into detailed arguments about arithmetic. Instead, he should recognise that the country as a whole wants him to respond constructively to the Amendments. All the organisations working for the disabled want him to accept what my right hon. Friend the Member for Leeds, East has said. There are right hon. and hon. Members on both sides who will fully endorse what my right hon. Friend said. I hope that at the end of the debate we can say that the two right hon. Gentlemen are moving together in a full acceptance of the Amendments.

Mr. Barber: I make it clear that in rising to speak now I am not seeking to curtail this important debate, but it may be for the general convenience of the House that I intervene now.
Long before the Finance Bill was published—indeed, as long ago as during the second half of last year—one of the most important aspects of VAT which my hon. Friends at the Treasury and I were considering was the impact of this changeover in indirect taxation on charities.
There are about 100,000 charities registered in England and Wales. Even this large number excludes churches and all Scottish and Irish charities. Further, as the Royal Commission on the Taxation of Profits and Income observed.
The term 'charitable purposes' covers activities which the ordinary man would not regard as charitable at all.
I appreciate full well that in this clutch of Amendments an attempt has been made by various right hon. and hon. Members to single out certain types of charity, or in some cases non-charitable voluntary organisations, which those supporting the Amendments consider to be especially worthy of relief. This selectivity in itself poses problems which will be obvious to the House.
8.45 p.m.
Having said that, I do not think there will be any difference of opinion in any part of the House about the very important part which voluntary service plays in our society. We in this country are fortunate indeed, as a result of decisions


taken by both major political parties, to have built up over the years a Welfare State which goes a long way to providing for those in need. But the Welfare State is not enough. No one who has been Minister of Health, as I was, could pretend that it is. The fact is that no Government and no local authority organisation can ever wholly replace the particular advantages of voluntary service.
It was with those thoughts in mind that I decided in the Budget to take certain steps to help charities, and I should first like to remind the House briefly of what has been done in this year's Budget—something which the hon. Member for West Lothian (Mr. Dalyell) yesterday fairly and generously described as a sizeable concession to charities. In the first place, the Bill provides that all gifts to charities of whatever character will in future be entirely exempt from capital gains tax. This, I shall tell the House, is a change which has been put to me on a number of occasions since I became Chancellor of the Exchequer. One individual who is well known for his charitable work and whose name will be well known to every hon. Member here, approached me specifically to say that he believed this concession would make a very considerable difference to the sums which individuals were prepared to give to charities during their lifetime.
The right hon. Member for Leeds, East (Mr. Healey) said that these concessions, and I noted his words, were demanded as a matter of justice. I can only say to him, and I do not say it in any spirit of animosity, that I know, as he does, that these
concessions which I decided to make had been turned down by my predecessors. But despite the fact that there were arguments against the change, I decided to make it.
It is not easy, if I may say so, to put a figure on the cost to the Exchequer, but after my hon. Friend the Financial Secretary was asked last night what the cost of this capital gains tax concession would be, I asked the Inland Revenue this morning to give me its best estimate. The best estimate I have been given is that the cost to the Exchequer of the capital gains tax concession will be £10 million a year.

Mr. Healey: Can the right hon. Gentleman tell the House what increase in the

number of gifts and/or legacies is assumed by that figure of the cost to the Treasury? The central question is what the elasticity is in this field and what marginal effect this change will have. The important thing to the charities is how much their revenue increases rather than how much the Chancellor of the Exchequer loses.

Mr. Barber: Perhaps I can deal with that point also in relation to estate duty, as I am about to do.
Secondly, there is estate duty exemption. I say at once that I recognise that this exemption will benefit some charities more than others and that there will be certain charities which will not gain very much from it——

Mr. Healey: Precisely.

Mr. Barber: I should have thought that was self-evident. The simple fact is that this change has been widely welcomed by charitable organisations. A person will in future be able to leave up to £50,000 to charities with that sum being left out of account altogether for estate duty purposes. The cost of this change is a further £15 million a year.
These two sums of £10 million and £15 million, making a total cost to the Exchequer of£25 million a year, are solely to benefit charities and the estimates take no account of the dynamic effects. I inquired particularly whether this was the case, and I am told that
in making the estimate no account was taken of the dynamic effects. So it will be apparent to the House that, if anything, the estimate may well be unduly modest and the cost may well turn out to be more. That seemed to be the most sensible basis on which to calculate these estimates. I did not ask for that particular method to be adopted.

Mr. Healey: I thank the Chancellor for making this clear. He will realise that many charities had assumed—quite wrongly, as is apparent from what he has said—that the gain to the charities would equal the loss to the Exchequer. But he has made absolutely clear that the cost to the Exchequer of £25 million assumes that there is no gain to the charities. I am not trying to make a party point. What I am saying is that the Chancellor is quite as unable as the rest of us to form any estimate of what


the charities will gain from these concessions as distinct from what he will lose.

Mr. Barber: When we are trying to debate a very serious matter of this kind, it is a little much to suggest, as the right hon. Gentleman has suggested, that because those who advise me can make no estimate of the dynamic effects of these two very major decisions, designed specifically to benefit charities, there will therefore be no dynamic effects.

Mr. Healey: With great respect, when the Chancellor reads Hansard I think he will realise that I suggested no such thing. The point I am making, which is critical to the debate because the issue has been raised on both sides of the House, is that the Chancellor is no more able than the rest of us to make any estimate of how far the charities themselves will gain from these concessions, as distinct from what he would lose if they gained nothing. I am not for a moment suggesting that they will gain nothing. I am seeking to get the Chancellor's agreement that he is no more able than the rest of us to predict what, if anything, charities will gain. One can guess that they will gain something, but the idea previously put abroad that they would gain what the Chancellor loses in tax is based on a misunderstanding of the facts and figures.

Mr. Barber: One thing is quite certain, and that is that although it is difficult, as my hon. Friend the Member for Horsham (Mr. Hordern) pointed out, to be precise about the effect of the changes in indirect taxation on charities, there can be no doubt that as a result of the changes as a whole in the Budget, charities generally will be substantial net beneficiaries. No one would seriously deny that. My hon. Friend the Member for Horsham pointed out, illustrating the point vividly, that there is a considerable danger—we have seen this in some Press articles—of considering the effect of VAT on charities without taking into proper account the abolition of purchase tax and SET. I shall return to that point.
I should mention one point raised today by the hon. Member for West Lothian. Yesterday he gave a figure which had been provided for him by Oxfam, estimating the advantage to

Oxfam of the new estate duty relief. But, as my hon. Friend the Member for Twickenham (Mr. Jessel) pointed out, that estimate was related wholly to the past and took no account of the additional incentive to testators as a result of the new relief. Some right hon. and hon. Members may take the view that it will not make any significant difference. But I do not believe that, particularly in view of the talks which I had with people concerned with charities, who urged me before the Budget to take these measures. They did not believe that there would be only an insignificant effect or no effect. They believed that the effect would be very considerable and that this would lead to a very significant increase in the flow of funds to charities.

Mr. Dalyell: Were these representatives of whom the Chancellor has spoken the representatives of what one might call the established, marble plaque, memorial charities or were they the representatives of those charities with current expenditure, such as Oxfam, which provide no memorials for the afterlife, to put it crudely?

Mr. Barber: I can only say that I had representations on both these points—mainly about estate duty but also, from a number of sources, about capital gains tax—and, so far as my recollection goes, they were from a variety of charities. I cannot remember any off-hand, except for one individual who has done a great deal for a variety of charities in this country. It is all very well for the hon. Member to sit there laughing. I shall not mention the man's name, but if I did he would be the first, I know, to pay respect to it because he would know the person about whom I am speaking.
Yesterday, in reply to an Amendment which the right hon. Member for Leeds, East rightly described this evening as of great importance, I promised to deal with the case of the charity which, because its trading turnover was less than £5,000 a year, would, on the face of it, be exempt from VAT but which, as a result of its organisational link with a national charity, might, as the Bill stands, find itself unable to claim exemption and so be liable to VAT.
This is an important aspect of the matter. Apart from the traditional local


jumble sales, sales of work and other money-raising activities, local charity shops have come very much to the fore in recent years. I promised to see whether it was possible to treat branches of charities as separate entities for the purpose of VAT even though they are not legally and formally separated from the parent charity. Any necessary amendment in next year's Finance Bill could operate with effect from the start of the tax. Meanwhile, I am asking any charity which is faced with this problem to get in touch with the Customs and Excise, which will do everything it can to help.
I turn now to a point raised by my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith). In the context of the undertaking which I gave yesterday, it is worth bearing in mind that, according to Oxfam, as we were reminded by my hon. Friend the Member for Horsham, of all the charities registered with the Charity Commissioners 94 per cent. have a gross income of less than £5,000 a year. Thus, when, in addition to this fact, account is taken of the undertaking which I gave yesterday, it will clearly be possible—at least, I sincerely hope so—for the overwhelming majority of charities to avoid these problems in relation to their sales because they will be completely exempt from VAT.
This is important, and I know that some of my hon. Friends, including, in particular my hon. Friend the Member for Basingstoke (Mr. David Mitchell) were concerned about possible liability to VAT in respect of sales of second-hand goods which had been given to a charity. On this matter, I think that it will be generally agreed that, if we are able to work out a sensible system, the problem with second-hand goods will be likely to be minimal.
Yesterday, in answer to my hon. Friend the Member for Dartford (Mr. Trew), my hon. Friend the Financial Secretary spoke about the burden on those responsible for the repair and maintenance of churches and listed buildings. This important matter was referred to again, quite understandably, by the right hon. Member for Leeds, East in his opening speech today. I wish to add to what my hon. Friend said yesterday.
There is no statutory bar on Exchequer aid for buildings if they are of outstanding historic or achitectural interest. In this respect, without any change in the law, churches are eligible, like other outstanding buildings, for grant under the Historic Buildings and Ancient Monuments Act, 1953. In fact, however, such outstanding churches in use have been excluded by successive Governments from benefit from those grant provisions.
The right hon. Gentleman referred to an observation made by my hon. Friend the Financial Secretary last night regarding certain problems of Church and State. In fact, my hon. Friend was on to a good point, because—I admit that I did not appreciate it at the time—churches which are in use have not benefited from the existing grant provisions largely, I understand, at the insistence of the Church of England itself. I gather that it is because to some extent these churches have been excluded from successive legislative controls which apply to material alterations or demolitions of other historic structures.
Having made the position clear, I assure the House that the Government are willing to consider any approach made by the church authorities about the possibility of grants towards the cost of repairs to historic churches, and naturally any question of grant for historic churches in use would not be confined to those of the Church of England.
9.0 p.m.
It may be that one solution for dealing with historic churches would be to do so through the normal grant system. The Government are ready to consider such a solution with the churches. But there may be a better answer and before any decision is taken the best course would be for the churches to discuss their problem with the Customs. I shall come back to this suggestion presently.

Mr. Healey: I have two points to put to the Chancellor. First, he must be aware that the main problem facing the churches is not how they deal with their historic buildings but how they deal with the normal upkeep of their church, manse or chapel, or whatever it happens to be. The Church of England estimates that value added tax will increase the cost by about


£200 a year for the average parish. Anything the Chancellor succeeds in doing for churches as historic buildings will affect only a tiny proportion of the buildings, and probably largely buildings of the Church of England. I regret to say that the number of Methodist churches which would qualify for this sort of aid is very much smaller than in the case of the other churches.
Surely the Chancellor must recognise that all the problems of the churches in this regard could be met if he would accept either the Amendment we are putting forward now or the one which the Financial Secretary rejected last night, namely, to relieve the repair and maintenance of churches—and churches are very easily defined—from the provisions of the value added tax. We cannot understand why the Chancellor rejects that very simple solution. Instead he worries himself about how he can apply the historic buildings legislation, which was not intended to deal with the problem, to find a solution.

Mr. Alexander W. Lyon: As my right hon. Friend has said, the whole point is a red herring. The Chancellor has simply read out the statement which was read out in Standing Committee C this morning by the Financial Secretary and which was also read out to me in 1967 by the then Prime Minister when I was asking for funds for York Minster. But the hoary old myth about the attitude of the church goes back to a statement by the Archbishop of Canterbury in 1913. The Church of England has changed a great deal since then and is anxious to receive help. If the Chancellor is using that statement as reason for not giving help, he would do well to reconsider his attitude.

Mr. Barber: I understand that the previous Government took the same view as we did. I know that the hon. Member for York (Mr. Alexander Lyon), like myself, takes a great interest in the restoration of York Minster. If he is saying, with the full authority of the Archbishop of Canterbury, that there is no problem, we can make progress. We have all noted what he said.
I want to turn to the suggestion by the National Council of Social Service——

Mr. Healey: Will the Chancellor comment on my intervention, because that is a matter of major concern to the churches? Why is it not possible to relieve the repair and maintenance of churches as such from the provisions of VAT?

Mr. Barber: I thought I had dealt with the point in dealing with the proposal which my hon. Friend the Financial Secretary put forward last night and which I have sought to elaborate. I used almost identical words to those used by my hon. Friend. That is because we in the present Government like to maintain a certain consistency. [Interruption.] I am sure the best answer is for the churches to consult with Customs as I have suggested to see whether they can find an appropriate solution.
I want now to turn to the suggestion made by the National Council of Social Service that:
There seems to be no doubt that VAT on the purchases made by charities will be substantially heavier than purchase tax, and that any saving on prices as a result of the abolition of SET will not compensate for this.
I do not doubt that this general expression of opinion is genuine. There will be some instances where the National Council may well be right, and I shall refer to them later. But in helping hon. Members to make up their minds on the Amendments I should say that the view of Customs and Excise, whose duty it is to advise successive Chancellors objectively, is that the general assertion is open to doubt. It has been provided with detailed accounts relating to a selection of major charities and has made a careful assessment of the overall financial effect of the changeover from purchase tax and selective employment tax to VAT. The result of its study does not support the view that charities by and large would suffer significant damage from the changeover. Indeed, its view is that in general the net difference seems likely to be small. This assessment takes no account of the earlier concessions to charities to which I referred some time ago.
I should here answer a factual question put to me yesterday by the hon. Member for Portsmouth, West (Mr. Judd), who asked what the position of charities was in the six EEC countries. I am told that charities as such, in the legal sense


in which we use the term in this country, do not exist in the Community. But there are many voluntary organisations, and I am told that the answer to the hon. Gentleman is that in none of those countries do they receive a repayment of the input tax as is proposed in the Amendments.
I come next to the problem which has obviously faced those who put down the Amendments, namely, which charities should benefit from the proposed concession. It is not surprising that there is a variety of suggestions. The problem of where to draw the line was recognised as particularly difficult when the matter was debated in Committee. There is, furthermore, the point which cannot be overlooked that there are other bodies which are doing valuable social work but which are not technically charities. An obvious example is friendly societies.
The next point which is relevant, although I say immediately that it is certainly not conclusive, is that if more than 100,000 charities were entitled to claim repayment in respect of VAT on their inputs—many of the sums claimed no doubt being almost trivial, but they would be entitled to the repayment—that would undoubtedly impose a considerable extra burden on the administration. I repeat that of course that is not a conclusive argument, but it is certainly not one which Parliament should ignore.
In view of all those factors, I do not believe that a case has been made out for general, across-the-board relief from VAT in respect of the inputs of charities as a whole. But this I will say to the House. If it can be demonstrated by particular charities that the effects on them of the various tax changes in the Bill would be to bring serious disadvantage, I should certainly be prepared to consider whether some means could be found of providing relief, perhaps by category of charities. But clearly I cannot be precise until we know more about what are alleged to be the financial consequences to the charities concerned. Incidentally, Customs tells me that it is clear to it that in some of the instances where charities have claimed to be seriously worse off those charities have misunderstood the way in which the changeover will affect them.
I have already explained what I hope to do to cover the problems of local charity gift shops and the like, and how we might deal with the problem of the heavy cost of repairs in respect of historic churches.
The hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) mentioned that yesterday my hon. Friend the Financial Secretary saw representatives of Spastics, Dr. Barnardo's, Oxfam and the Central Council for the Disabled, about which the hon. Member is particularly concerned, to discuss the problem of VAT as they considered it affected their charitable activities. I understand that at that meeting the charities agreed to provide further information and to meet the Customs for another discussion as soon as the various charities are ready. I invite any charity which feels that it can demonstrate a significant deterioration in its position as a result of the changes in this Bill to send details to the Customs and Excise. I can assure the House that Customs will approach the forthcoming discussions in a constructive and helpful way and report back to me in good time before the introduction of VAT next year.
I know that the House will appreciate the position as I have put it, and, in the light of the offer which I have made, I believe that those who wish to approach this matter fairly and objectively will agree that it is reasonable to ask that the Amendment should be withdrawn.

Mr. Alexander W. Lyon: I do not know why the Chancellor will not yield on this Amendment. He hopes that if 95 per cent. of charities will not be registered for VAT because of the size of their turnover that will deal with a considerable slice of the charitable activities. He goes on to indicate that the Bill will not bite on certain restricted charitable activities because they are exempt on other grounds.
The Financial Secretary, when he replied to the letter from the National Council of Social Service, said that the Department of Employment would consider the grant made to sheltered workshops and rehabilitation centres in the light of the yield of VAT which would be required to compensate them for that yield.
When we add all these penny packets together, we see that the cost to the


Treasury of accepting the Amendment would be very small. The Chancellor of the Exchequer has alleged that he wants to relieve charities as far as possible of any additional burden. I should have preferred the Amendment which I tabled to the Schedule 4 to zero-rate charities, because their position should be improved rather than simply, as the hon. Member for Horsham (Mr. Hordern) suggested, not disadvantaged as a result of the change from purchase tax to VAT. There is a way of improving the position of charities, because, although it is difficult to see how they could reclaim purchase tax, it is by no means difficult to reclaim VAT because of the system which will exist. Therefore, at a time when we are introducing a completely new tax, we should have given them this benefit.
I wish to deal with the red herring of the hon. Member for Horsham that because 95per cent. of charities have a turnover of less than £5,000 most of the problem is cured. I first became interested in the problems of charities as a result of the introduction of SET. I suggested to the then Labour Government that they should not impose SET on charities. As a result of the pressure from both sides of the House the Government yielded and did not impose SET on them. As a consequence of the study which was made, we came up against the problem which the Chancellor mentioned today, namely, that there are many charities which the average man would not regard as charitable and there are many activities which cannot be registered as charitable but which he regards as charitable, and therefore there may be a case for revising the definition.
I asked the Charity Commissioners for a list of the charities and I was taken into a room on the whole of one side of which was a collection of the names of the various charities. The room was stacked from floor to ceiling with little books containing the names of charities. But 95 per cent. of them were tiny charities that had no effect upon the life of the community at large. A limited number of big charities are responsible for the wide range of charitable activities and that is the area with which we are concerned.

Mr. Barber: I reinforce the point made by the hon. Gentleman. On making some

inquiries I was told that the object of one charity is:
To improve the conditions of life of residents in the Borough of Hastings in or before 1880 or their descendants by helping them to emigrate.

9.15 p.m.

Mr. Lyon: As the Government trundle on from one disaster to another that charity may be useful. I take the point that we are concerned with 5 per cent. of the charities, but that 5 per cent. provides about 90 per cent. of the charitable activities and, therefore, the point made by the hon. Member for Horsham is invalid in this context.
The concessions for estate duty and capital gains will affect the prestigious charities which attract that kind of gift or legacy, but they will not affect the many charities which are prominent in help to the community. How much Shelter will benefit from the concessions in the Budget is speculative. It is likely that the Spastics Society will benefit considerably, and I am not at all sure that the Spastics Society does not already have considerable endowments as the result of past legacies. There is a whole range of charitable activities which will not benefit very much but which will have to pay VAT. It is incredible that anyone should want to tax compassion as the Chancellor is proposing to do. I am sure that, if he looked at it again, he could say that charities should be zero-rated, or that the concession asked for in this series of Amendments should be given and that they should not have to pay this amount of VAT.
Charities provide services which, if they were not provided by charities, would have to be provided by the State. For precisely that reason we have exempted local government and local authority services from the whole range of VAT. We say it is ridiculous to tax those services when either central government would have to reimburse the tax or it would have to come out of the rates. Exactly the same argument applies to charities, which are different from any other range of commercial activity on which VAT will fall.
We are united in believing that it is important to stimulate charitable activity. Given the philosophy of the Government, it is even more important that charitable activities should be stimulated. Therefore,


I hope that the Government will reconsider their parsimonious attitude and allow the Amendments to go through.

Mr. R. J. Maxwell-Hyslop: I am far from convinced by my right hon. Friend's defence, because most of it was peripheral to the major matters which we have been discussing. The principal Amendment which we are discussing has nothing to do with the disposal of assets by charities, with charities handing over anything or, therefore, with the £5,000 exemption limit. The Amendment has to do with Clause 15 which itself has to do not with the disposal of assets but with the acquisition of assets or the performance of services. That is a point of substance of which my right hon. Friend should take note.
Let me give an example of the capricious manner in which the replacement of purchase tax by VAT can work.
Whereas the purchase tax is not chargeable on services, VAT is. A large number of charities are completely heterogenous in the manner in which they spend their income—on the one hand by purchasing and distributing articles which might have been subject to purchase tax, and on the other hand by spending their resources on service, for instance, on the maintenance of structures.
Where a large proportion of the income of a charity is spent on the maintenance of structures for charitable purposes, exchanging purchase tax for VAT is an exchange which will leave that charity very heavily in deficit. It would be reasonable for my right hon. Friend to suggest that there is a comparative balance between abolishing purchase tax and substituting VAT from the point of view of charities only if purchase tax applied to services, which it does not. Therefore, it is necessary that we should include provisions such as those in Amendment No. 103 to include within Clause 15 charitable bodies.
I find unconvincing the argument that there are a large number of charities which may be moribund, that therefore the effect is negligible and that we can leave them out of our calculations. There are a large number of funds—and for all I know my right hon. Friend may be a trustee of a number of them—which are of a bizarre nature; for example, looking after the survivors of the collision

between the "Victoria" and the "Camperdown", and the survivors of Mafeking, which are all grouped under the Royal Patriotic Fund Corporation, which sends an annual report to the House.
This is not the sort of matter with which we are concerned. We are concerned with organisations such as Shelter where a large proportion of funds collected will be spent in a manner which will not benefit from the cancellation of purchase tax, but which will suffer considerably from the imposition of VAT because it is concerned with services.
Furthermore, a number of charities
which supply services to certain sections of the community at a cost well below the economic cost of providing that service will also be affected. As I see it, the Bill unamended will make the services they render subject to VAT from the beneficiary. It cannot be paid by anybody else, so
it will be paid by the beneficiaries. I do not know whether the trust deeds will allow them to pay the VAT themselves. This is a legal point which should be looked into. But I see no provision in the Bill which overrides the normal trust law to enable the charity to pay the amount which legally would be payable by the recipient for either goods or services at a less than economic cost. This matter is much more complex than my right hon. Friend realises.
The way to cut through the complexity of the problem is to have a general exemption on charges. If this is done, then the administrative costs in dealing with the small rebate claims would largely disappear. The need for many of the exemptions on purchases could be offset against a general exemption on sales. My right hon. Friend would do well to cast his mind in this direction.
The tiny dormant charities concerned will not need to make claims under Clause 15, but the major ones, whether they be churches or organisations for providing accommodation of one kind or another where very often a considerable amount of money will be spent on alterations or redecoration are a case where a lot of VAT will have to be paid.
Much the easiest way out for my right hon. Friend would be to go back to the old principle in taxation law that charities


are exempt from taxation. The fact that the logic of this was not carried into the purchase tax law by giving rebates is not a very good ground for saying that it should not be returned to now.
I hope that on reconsideration my right hon. Friend will agree that instead of picking and choosing by individual Amendments which seek to distinguish between the merits of different kinds of charities—which is a task that this House is not fitted to carry out; indeed, if it were to carry it out conscientiously we should still be here in September—much the best that he can do is to import into the Bill a general exemption from the provisions of VAT for charities as a whole, and leave it at that.

Mr. Frank Judd: I endorse warmly much of the message spelt out by the hon. Member for Tiverton (Mr. Maxwell-Hyslop). He referred to the impact on charities of VAT on services, which is a major factor which has to be taken into account.
In his intervention just now, the Chancellor of the Exchequer referred to his correspondence with the National Council of Social Service. I ought to own up by saying that I am a vice-chairman of that body and have been intimately concerned with that correspondence.
That right hon. Gentleman said that in making estimates about the impact of VAT as compared with the impact on charities of SET and purchase tax, the Customs and Excise had looked at a representative cross-section of the larger charities. But that in itself is a rather worrying argument. All
charities are affected by SET and purchase tax, all 100,000 of them, and all will be affected by VAT. Therefore one has to look at a wider and more representative cross-section of charities as a whole than just a few of the larger ones if one is to make an acurate assessment.
The second point in the right hon. Gentleman's speech which I wish to take
up concerns what he said about my remarks in the course of yesterday's debate. He has consulted his experts and checked the situation in the Six. Yesterday, however, we were discussing the output tax. Today we are discussing the input tax. I made my observation yesterday about the output tax. We could still do with more

information generally about the detailed implications for equivalent types of organisations in the Six if we are to learn valuable lessons from their practical experience.
That brings me to one of the major points about this debate. I am sure that any fair-minded person listening to the arguments being presented will agree that one of the glaring inadequacies of the debate is the lack of precise information. The Chancellor of the Exchequer took me to task for smiling when he referred to one important individual with whom he had had conversations. I do not object to the right hon. Gentleman's fulsome praise to the gentleman for what he has done. But one cannot assess the significance for charities of this complicated new legislation in terms of what one generous individual may have said about the proposition. We have to look at it on a more scientific and detailed basis. We cannot look at it in terms of what some donors say about it. We have to look at it in terms of what the organisers—those with day-to-day responsibility for running the charities—see as the implications of the proposal.
9.30 p.m.
Naturally it would be churlish not to give a word of welcome to the Chancellor's remarks about a readiness to look at what happens over the next year. This indicates the real misgivings which I am sure exist in his mind and the minds of his colleagues as they consider what is being said in the debate. However, it is not reassuring to a charity, which may be desperately anxious about how to raise the funds to keep its programme going next week, next month or next year to be told that if it writes to the Customs and Excise that department will look sympathetically at its problems so that appropriate measures might possibly be taken later.
I speak from practical experience, as I said yesterday, having been General Secretary of a national charitable organisation for seven years before becoming a Member of the House. I think of the reality, not the theory, of charities throughout the country and their committees meeting anxiously, worried and wondering how to find the funds to keep their programmes going, let alone expand them. While they may take solace from


this general word of sympathy by the Chancellor, it will not be good enough in terms of giving them the practical assistance they will need to keep their programmes going for a year, even if we see significant changes in a year. On this point I endorse what was said by the hon. Member for Tiverton. The only fair and effective way to look to their immediate needs is to introduce a general exemption now. This also relates to the point about swings and roundabouts on which we touched briefly yesterday and underlines the inadequacy, the generalised almost meaningless point, of the debate today.
We need to look through the list of charities, however big and complicated the task may be, in terms of human beings both in this country and abroad who will not get the services they have been receiving during the past year and in preceding years as a result of this new policy. We must look at this list in detail before we can come to an honest conclusion whether we can accept this proposition. It is no use saying that some charities will benefit and others will not but that overall, looking at the position in a general way, the situation will be marginally better than before. That is not looking at social service in a responsible way.
We must recognise that many of the practical, front-line, pioneering charities, those which are primarily concerned with social work supported by volunteers who use all their time in social action and have precious little left to raise the funds to make their social action possible, will suffer in the next year as a result of other tax changes, the merits of which I do not want to comment on tonight, which will mean a major drop in income in terms of their impact on deeds of covenant.
There are other matters at which we must look. I am sorry if they seem a little philosophical, but having worked in the charitable sphere I feel that they are absolutely critical in the debate. Charities exist to deal with and put right symptoms of the fundamental problems in society. I hope I shall not be accused of being totally unfair in the context of the good-natured debate we have had so far when I say that some people, slaving

away in charities to try to deal with those symptoms, will find it sad to reflect that a Government which are so hell-bent on redistributing wealth in society in favour of the wealthy and aggravating some of the basic problems are now looking to the charities to raise more taxation because of a retreat from the principles of direct taxation. This is a serious charge about which we should have heard more. We shall see a crude situation in which the more that charities do, the more they will have to pay, instead of the wholesome principle of direct taxation whereby the more a person makes, the more he contributes to society. Unless we are prepared to accept the fundamental issues, we are having a superficial debate about the whole problem.
I do not want to trespass on the time of the House much longer, but the Chancellor referred to correspondence with the National Council of Social Service. The council is not an individual charity but a framework which represents a large number of small, medium-sized and large charities, and it has no existence apart from the organisations which make it up. For that reason, with the leave of the House, I wish to quote from the latest communication sent to the Chancellor as a kind of cri de coeur from the officers of the council writing on behalf of the countless charities which make up the council's membership. The letter summarises the position rather clearly.
The officers say:
We are convinced that unless the Finance Bill is amended charities will suffer from the introduction of VAT. There seems to be no doubt that VAT on the purchases made by charities will be substantially heavier than purchase tax and that any saving on prices as a result of the abolition of SET will not compensate for this. Our fears as to the threat posed by VAT have been strengthened by recent confirmation from Mr. Higgins of how VAT could affect certain activities.
Residential and day care establishments run by charities, whilst for the most part being exempt, will have to meet the additional cost of VAT on their purchases. This is bound to reduce their effectiveness and this imposition seems doubly unfair in the knowledge that local authorities running similar homes can recover the VAT included in the cost of their purchases.
Fund-raising will be taxed. We are aware of the exemption relief for small traders but many local events are run by branches of national charities and will therefore not qualify for this exemption.


Yesterday we had a welcome move by the Chancellor in this respect and, together with others, I applaud what he said, but what has been suggested in this debate is that charities can reorganise their charities so that more of their activities can be constituted as individual branches operating on their own so that they will not be disadvantaged in the way that would originally have been the case had they not taken such a step and had the Chancellor not made his statement yesterday. A remark of that kind is very much out of touch with the reality and spirit of the charitable movement. It may be how a company goes about its affairs to avoid the heaviest burdens of taxation, but people who run charities want to get on with the job and do not indulge in the administrative rigmarole of setting up separate subsidiary branches.

Mr. Barber: That is not what I said or suggested.

Mr. Judd: I am not suggesting that that is what the right hon. Gentleman said, but it has been suggested in this debate that a number of charities might do things like that.

Mr. Hordern: The hon. Gentleman may have been referring to my remarks, but I did not make the comment that he alleges. I was referring to branches of national charities and these, being under the £5,000 level, as the hon. Gentleman ought to know, are to be exempt. There is no question of forming separate charities within the national charities. The hon. Gentleman must try to get his facts right.

Mr. Judd: Precisely. The fact remains that there will be a tendency for organisations to be encouraged to set up on a small scale of activity because there will be a feeling that by so doing the problems of taxation will be less grave.
The letter goes on to say:
Mr. Higgins has confirmed that there will be no relief from VAT on second-hand goods. This will be most discouraging for the many voluntary workers raising money for charities by selling such goods and this decision will undoubtedly erode the income from this source.
We are concerned by the possibility of membership subscriptions being taxable.
It has also been represented to us most strongly that the tax will place additional administrative burdens upon those charities with taxable activities, especially if some of these are zero-rated; this must surely add to their overheads.

We greatly appreciate the concessions on Estate Duty and Capital Gains Tax included in your Budget but we cannot accept your contention that these will more than compensate for the effect of VAT. Inquiries we have made show that, for some time at least only a relatively few long-established and well-known charities, mostly with an emotive appeal, are likely to benefit significantly from the estate duty concession. Until testators increase the size of their legacies to charities, only residuary bequests from estates large enough to suffer estate duty will show an immediate benefit to charities. Many thousands of charities will not get this benefit but will have to bear the additional burden of VAT.
We know you are concerned that the granting of relief might create anomalies between charities and some other benevolent but non-charitable organisations. With respect we would point out this is no new issue and has arisen on numerous occasions in the past when tax concessions for charities have been considered, notably rating relief, income tax relief and SET relief. We defend this special treatment of registered charities, not only on philosophical grounds but also because they among benevolent bodies are subject to statutory controls which ensure that their income from whatever source is used only for the public benefit.
We doubt whether the administrative problems of granting registered charities complete relief are as great as has been suggested. Not all of the 100,000 charities will need to reclaim VAT, and we cannot see that Customs and Excise will face any greater problem than the Inland Revenue has resolved in respect of the recovery of income tax or the Department of Employment and Productivity in respect of the recovery of SET.
The actual impact of VAT may or may not be as serious as we fear but what cannot be overlooked is that the very existence of this tax on charities will be seen as an expression of lack of faith in the voluntary movement and will surely lead to much discontent and discouragement Enormous heart was taken"—
I strongly endorse that on a personal basis—
from the Prime Minister's address to the National Council last December when he said, 'This is a Government committed to releasing the energy and enterprise of men and women so that they can build a better life for themselves, their families and their community as a whole.' We have to say to you that the course being adopted by the Treasury seems to be in complete negation of this policy.

Miss J. M. Quennell: Will the hon. Gentleman help the House by giving the dates of the two letters from which he has quoted, the one from the National Council and the letter referring to Mr. Higgins?

Mr. Judd: The quotation which I have just given was from the Prime Minister


addressing the National Council of Social Services last December. The one letter from which I have been quoting was written three days ago. I do not apologise for quoting that letter at length, because this is not a letter written by any one charity or individual but a letter from an organisation which represents the interests of a large number and a wide cross-section of charitable organisations.
If we are to have a healthy, civilised community with a warm relationship
between charitable organisations and statutory organisations. I am sure all hon. Members will agree that whatever the tremendous strides forward in social care through the institutions of the Welfare State, it would be a sick form of society in which there was no spontaneous concern for those who are under-privileged and disadvantaged. We want to give this sort of activity every possible source of inducement to expand so that we can improve the quality of British life.
If this partnership is to flourish it needs encouragement from Governments, of whatever political persuasion, and not, as I believe we have seen in the Bill, the pouring of cold water over all the enthusiasm, the conscience and the compassion of the best elements in British life. I welcome the Chancellor's indication that he will look at this problem again. If he is as concerned as I believe he is, I am certain that even at the eleventh hour plus he will take drastic action and introduce a general exemption.

9.45 p.m.

Mr. Christopher Woodhouse: I hope that one of the thoughts that the Chancellor will take away from this debate is that it is high time that we had a fundamental look at the law on charities and revised that law radically. The debate has shown that there are many anomalies hidden in the law relating to charities which the Chancellor has indicated he fears may be multiplied by some of the Amendments. Meanwhile, we have to deal with the status of charities as it is. I warmly support the principle of the comparatively simple Amendments tabled to Clause 15.
My Amendment, No. 216, is not simple, it is complex and it is almost certainly defective. Let me save the Chancellor the trouble of saying that. It is complex

because such is the nature of the law of charities. The underlying thought I have tried to embody in the Amendment is the segregation of commercial activities of charities from the strictly charitable activities. As the Chancellor pointed out, the general conception of a charity in the mind of the public is something quite different from the legal definition.
The public, when it thinks of a charity, thinks of bodies such as Oxfam or Shelter. Possibly it may even think of purer kinds of charity which do not serve a material purpose at all. One of the purest kinds of charity known to me is one established in my constituency in the 14th century to pray for the souls of those killed in the French Wars. There are other kinds of charitable bodies, of which the public does not think at all when it thinks of a charity. Some charities in the legal definition are large and rich; some of the richest bodies in the country are charities. Quite a number are in my constituency. They are landowners on a very large scale. They may engage in commercial activities on a considerable scale, too. Even the kinds of charities which the public understands by the term have also in recent years become engaged in quasi-commercial activities, which is one of the reasons why the problem is so intractable.
For example, another well-known charity in my constituency, Oxfam, makes a good deal of money out of sales in its shops and the sales of Christmas cards. It has made it clear that it would not expect any kind of relief from VAT in respect of the sale of Christmas cards or other activities of a straightforward commercial nature. Of the things it sells in its shops, a few
are purchased, the majority are gifts. It seems to the layman not at all difficult to discriminate between those two types of sale of goods and one of the purposes of my Amendment is to do just that.
In many constituencies—this applies particularly in mine—there are sheltered works. These present a difficult problem, but it should be possible to establish a criterion for concessions to them based on competitiveness with strictly commercial interests. I believe that commercial retailers do not regard sheltered workshops as a form of unfair competition and it would not be difficult to reach an agreement with the Customs and Excise


providing for exemption in the case of sheltered workshops.
A number of charities take the form of "the friends of" such-and-such an institution. In some cases the friends of a given institution give some benefits in return for membership subscriptions. Where no benefit is given in return for a membership subscription, which is the case with the Friends of the Ashmolean Museum, in contradistinction to friends of other artistic institutions and museums, it should not be impossible to find a means of giving the concession from VAT which is sought in the Amendments.
Some wealthy charities in my constituency, namely, the colleges of the University, as applies with colleges of universities elsewhere, make a considerable income during vacations by turning themselves into something very like catering institutions. In respect of that part of their activities they presumably would not expect any concession from the tax. In respect of their educational functions they could reasonably do so.
I have made these points merely to illustrate the complexities which are injected into the debate by the present status of charity law. I would much prefer that the Chancellor should as soon as possible initiate a reform of the law on charities with a view to removing anomalies of the type which make a decision on the Amendments so difficult. Meanwhile, we must deal with the situation as it is. My purpose in supporting this group of Amendments is to anticipate and try to forestall the argument that a simple Amendment such as No. 103 will only substitute new anomalies for old.

Mr. A. E. P. Duffy: I wish to divert the attention of the House from charities and the related Amendments to Amendment No. 109. I invite the Chancellor to consider tax refunds to
any organisation receiving a grant from the Arts Council".
The organisation I have in mind is the living theatre. Unlike my hon. Friend the Member for Putney (Mr. Hugh Jenkins), who, if he succeeds in catching your eye, Mr. Deputy Speaker, will wish to make a general approach to the same problem, I shall confine myself to the theatre in the provinces.
I ask the House to consider a specific case—the Crucible Theatre in Sheffield which is a new construction which was opened less than a year ago, which cost more than £1 million, and which was financed on a tripartite basis by the Arts Council, Sheffield Corporation, and public subscription. The contribution of the Arts Council was a capital grant of £300,000, plus a revenue grant.
This is a new theatre. It has been open for less than a year. It is the first theatre in the country to be committed to a deep-thrust or promontory stage, with the audience on three sides. The main auditorium seats a thousand people, and there is also a theatre workshop which seats 250. The workshop has a twofold function: it undertakes experimental work and it caters for schools.
I am sure that as a fellow South Yorkshireman the Chancellor of the Exchequer will be interested in this theatre. It is the only full-time professional theatre operating in South Yorkshire which, as the right hon. Gentleman will also know, is soon to be a new metropolitan authority. The Crucible Theatre in Sheffield will therefore be providing for the whole of this metropolitan authority. This week it is playing to packed houses. William Douglas-Home's "The Secretary Bird" is being performed. There is no lack of success, as well as deep pride in Sheffield and the whole of South Yorkshire in the new theatre.
Yet already the Crucible Theatre has had to make economies due to increased costs, though its first year's balance sheet necessarily cannot be available. Because of VAT, it faces the prospect of a levy of 10 per cent., not merely on admission charges but on costumes, scenery, printing and advertising. The additional cost has been estimated at £10,000 a year, though it could very well be double that sum.
It is not believed by anyone in Sheffield that the theatre can any longer look to a city council, which has been more than generous, for subsidy to cover this additional cost. Nor is it believed that the theatre can look realistically to an Arts Council which in any case may very well have to go on increasing its grant just to keep pace with inflation.
If the theatre cannot look to the public its outlook is gloomy, yet I cannot believe that any hon. Member present


does not appreciate the difficulties of merely relying on public support. There is a distinct possibility that the theatre's very survival, even in its first year of operation, may be at stake, so delicately poised are its finances. But only a subsidised theatre of this type seems any longer to be viable in the provinces.
I hope that the Chancellor of the Exchequer will not call into question the theatre's survival in this way, but that by accepting Amendment No. 109 he will relieve theatregoers throughout his native South Yorkshire of the acute anxiety they presently feel about the future of the Crucible Theatre.

10.0 p.m.

Mr. Robert Cooke: I must join issue with the hon. Member for Portsmouth, West (Mr. Judd), who completely misrepresented our philosophy in this matter. I can only assume that he did so out of ignorance, because anyone who claims to be so personally involved in the charitable work he mentioned cannot have done it from malice or in an effort to make a deliberate political attack.
The hon. Gentleman complained about the burden as he saw it—it is imaginary—that VAT might have on the charities in their day-to-day fund-raising activities. He painted a picture of a hand-to-mouth existence. I see that the hon. Gentleman nods assent to that. He also spoke about how these charities were treating the symptoms of the various matters they were trying to tackle. But if the hon. Gentleman knew anything at all about medicine, he would know that what one has to do is to find the disease and treat that and not treat the symptoms. The effective way is to treat the disease. That is what my right hon. Friend is trying to do. He is trying to help charities with their financial problems and to help them to go ahead with their activities on a firm financial base. The hon. Gentleman has expressed his doubts, but I believe that the estate duty and other provisions my right hon. Friend has introduced will provide this firm base.
That should appeal to hon. Members on the Opposition side because the provisions will bring about a redistribution of wealth, and that is what it is all about in the minds of the Opposition. This

is almost part of Socialist philosophy. But it is being done in a highly beneficial way and there is an element of personal choice in this. It would appear that one has the choice now of either giving one's money to a good cause or letting it go to the "hated" Revenue, or to the Chancellor of the Exchequer, if one must be personal. It is the Chancellor of the Exchequer, and not just the person the hon. Gentleman mentioned that he knew all about and whose word one could not take as gospel, who is the anonymous—perhaps not so anonymous—benefactor potentially, because the funds which go to charities great and small by means of these concessions are potentially enormous and they will provide a firm foundation upon which people like the hon. Member for Portsmouth, West can build and organise. They will not have to spend every day of their lives deflected from their proper course in looking after those they want to help by wondering where the next penny will come from.
I welcome what my right hon. Friend said about the way in which historic churches can be helped by the process he is proposing and the way in which the Historic Buildings Council, no doubt with more funds than it has been given recently, can cope with that problem. It is right to deal with all the churches' problems of their historic buildings by this method and not by putting the churches in a special category.
The churches also have modern, multipurpose buildings to take care of. Some of them are used even as bingo halls as well as places of worship, and that is not what we are trying to deal with. We are trying to deal with the burden of historic buildings. The fact that the Church of England has a great many is a historical accident. But the Church of Rome has plenty too. Many high, Victorian churches belong to the Church of Rome, which has its problems with them. It was no good when hon. Members on the Opposition side shook their heads and suggested that only the Church of England was involved. There is an enormous number of free churches throughout the land. In the West Country in particular there are some fine late-Georgian and early nineteenth century buildings which have crumbled away for lack of funds and which could


certainly be saved if the Historic Buildings Council could spread its net a little wider.
This is an interdenominational problem. Perhaps the Church of England has more buildings than the others for which to care, but it is those buildings which are our principal tourist attraction. No one would suggest that even Westminster Abbey was, at this moment in history, primarily a place of worship. It is a place of tourist resort. Only yesterday I thought that I would take a quiet walk through the Abbey and have a look at some of the things I like looking at there and contemplate on my way to the House. But not a bit of it. Immediately I found myself somewhat firmly marshalled into a queue and I nearly had a guided tour.
These national monuments obviously ought to be cared for by the nation and not just by one denomination or another. We all benefit greatly from them, not only our own people but all those who come from abroad.
I am certain that any marginal ill-effects which VAT is alleged to have on the churches as a whole will be more than adequately made up by what the Historic Buildings Council can do to help with the fabric.
For one motive or another, hon. Members on the Opposition side are making a great deal of unnecessary fuss about this matter. As one devoted to the welfare of our historic buildings, realising the value of the contribution which they can make to modern life, I am well satisfied with my right hon. Friend's proposals.

Mr. Hugh Jenkins: I doubt that those concerned with running charities will derive much comfort from what the hon. Member for Bristol, West (Mr. Robert Cooke) said at the beginning of his speech. Indeed, I have here a letter from the director of one charity, of which the Prime Minister himself is a supporter, which shows what the feeling is. Mr. Falkner, the director of Help the Aged, says:
Surely, the present Chancellor would not wish to go down in history as the one who set back the wonderful tradition that Britain has in leading the world in voluntary giving and in charitable enterprise.

Nothing I have heard from the Chancellor today has given me cause to believe that anyone in the charity world can draw great comfort from what he has done. One hopes that one is wrong. One hopes that the
crumbs which the Chancellor has spread out will prove rather more substantial than they now seem to be. But we shall have to wait for the evidence of that.
My hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) was right to draw attention to the fact that the Chancellor did not refer specifically to any of the specific Amendments, and, in particular, made no mention of Amendment No. 109, which would add to the bodies able to claim a refund of tax in certain circumstances,
any organisation receiving a grant from the Arts Council.
My hon. Friend drew attention to the plight of the theatre outside London, giving the example of the theatre in his own constituency. This is a serious matter. It is fair to point out that, in Committee the Chancellor said that he was conscious of the threat to the theatre and bodies supported by the Arts Council, and he gave an undertaking that, if the fears which had been expressed by people responsible for running various theatres throughout the country were justified, then, at least as regards those supported by the Arts Council, he would see whether funds could be made available to increase the Arts Council grant so that the Arts Council could in turn help such theatres.
I felt at the time that that was a somewhat vague and unsatisfactory offer. I must say in passing that I find it a little surprising, to say the least, that a Conservative Government are, apparently, prepared to neglect the commercial theatre and to confine any help which they are inclined to give to the supported theatre. But I do not complain about that. If the Chancellor wants to help the supported theatre, by all means let him do so.
I have a different method to suggest to the Chancellor for going about what he said he would like to do. His suggestion was, as I say, that if it turned out that a theatre was in difficulty at the end of the year, he would, after asking the Arts Council and being told who was in


difficulty, increase the Arts Council grant so that it could, in turn, put the money back.
The right hon. Gentleman would save a great deal of administrative trouble and avoid going through that rather complicated process in one of two ways. He could take the powers outlined in the general propositions put forward by our Front Bench today. It is worth bearing in mind that almost all the theatres in receipt of money from the Arts Council are themselves charitable bodies. Therefore, the general amnesty for charities would benefit them all.
If the Chancellor wants to be more specific we can offer him another method. It is indicated in Amendment No. 109. The bodies for which he proposes a refund under the Clause—such as the BBC, Independent Television News and so on—can be extended in number by an order made by the Treasury. Instead of the tax being deducted and the whole procedure being implemented so that the theatres and charities are short of money while they wait for the repayment the Chancellor could issue an order providing that any organisation receiving a grant from the Arts Council shall be exempt from the tax.
Would that not be a better way of proceeding rather than deducting tax, waiting for a period and giving the Arts Council the task of deciding whether an organisation is losing money because it is paying VAT, because it is inefficiently run or whether it is artistically bad? Instead of working out all those complicated sums would it not be simpler to issue an order exempting all organisations receiving the grant from the Arts Council from the impact of the tax.
The Chancellor could and should accept the proposal. I hope that he will take the wider step recommended by the Opposition Front Bench. If he does it will save an enormous amount of administrative complication. I do not know whether it is generally appreciated how great will be the difficulties experienced in the theatre by the attempts to administer VAT. For example, the theatre is one of the few areas in which some of the people working there will themselves have to charge VAT on their income. Some people operating in theatre are companies and as such they will have to

charge the 10 per cent. value added tax on their income to their employer. If the person concerned is a self-employed variety artist earning more than £5,000 a year, he will have to add 10 per cent. on his charges and value added tax will have to be charged by him as an addition to his employment.
This shows the extraordinary degree of complication which will occur because VAT in these circumstances will be charged upon the wage or fee. The complication could
be avoided by the Chancellor accepting
either the Amendment moved by my right hon. Friend the Member for Leeds, East (Mr. Healey) or by accepting Amendment No. 109. I am prepared to give way to the Chancellor if he wishes to rise now to announce his acceptance, and to say that he will issue a Treasury order agreeing to the sort of exemptions we are seeking. In those circumstances we would be prepared not to press Amendment No. 109. Since we do not have the opportunity of voting on Amendment 109, I am not giving a great deal away. Nevertheless it is a concession I offer to the right hon. Gentleman. Let him jump to his feet and accept it.

10.15 p.m.

Dame Irene Ward: I have listened with great interest and sympathy to what my right hon. Friend the Chancellor said. Whatever action he takes, he takes with the greatest care, humanity and understanding. But tonight I am sorry to say that I cannot agree with the line he has adopted. The whole issue has been put into operation far too quickly. For instance, when my right hon. Friend said that certain representatives of various important voluntary organisations had been seen, I wondered why the British Legion and the Red Cross had not been seen. There is a number of first-class charitable organisations with a much wider knowledge of what goes on in trying to raise money for charity.
My right hon. Friend does not realise the enormous shock this decision, made far too quickly, has caused, perhaps incorrectly, to people who have given years of service to raising funds to help good causes. I fully appreciate all that my right hon. Friend has done in the Bill. We are all very grateful. But I hope he will not mind my saying that sometimes men


think that bigger things are more important than little things in life, whereas psychologically—I try to be a good psychologist—little things are much more important than the larger things, to the way in which our community tries to serve, even though much of the money comes from the Treasury, and I could not welcome it more.
Shocks can be given to the public which even the nicest Chancellors do not understand. I do not often beat my feminist drum, but sometimes women are better than men at this kind of thing. It would have been much better if my right hon. Friend had consulted those of us on both sides of the House who have knowledge of the immense amount of voluntary work, work done with pleasure, good will and humanity, than suddenly to land this on our community. I very much regret it. Does he not realise that in the minds of the ordinary people who try to help with good causes the Customs and Excise does not mean a thing?
My right hon. Friend was kind enough to let me know that he regretted that I disagreed with him, which I thought was extremely nice of him. Cannot we start afresh and have an inquiry on the lines that my right hon. Friend wants? He wants to do his best, and we want to do our best, but there is a wide gap between humanity and knowledge. I feel rather diffident in saying that on this subject perhaps I have a little more knowledge than my right hon. Friend. It would be helpful if we could have a proper inquiry so that everyone could put his point of view.
My right hon. Friend must do something to allay the shock to the general public. An immense amount of anxiety has been felt.
I shall support my right hon. Friend in the Lobby tonight. [Hon. Members: "Oh."] If my right hon. Friend were not in power, there would be no money for anybody. So I want to hang on to the money. However, I shall support my right hon. Friend in the Lobby, much against the grain, because I do not really want to do it, but I shall do it because I believe that his motive is right. But please, oh please, do something to allay this enormous shock to people who do not understand what it is all about.
I hope that before long, when my right hon. Friend has had time to reconsider the position, he will talk not about the Customs and Excise but about the humanities and that he will contact all the big organisations—and there are many of them—which will willingly give him all the support, knowledge and understanding he wants in dealing with this difficult situation. As I say, my right hon. Friend will find me in the Lobby with him, much against the grain, but, by Jove, I hope I shall get something for it in the months to come.

Mr. John Farr: I congratulate my right hon. Friend the Chancellor on the steps he has taken in the Bill to help charitable bodies in relation to estate duty and capital gains tax. However, I, too, wish he could include in the Clause the words "or charitable bodies". The reasons why I say that are twofold.
First, I do not believe that the charitable concessions which my right hon. Friend has made will be felt by certain charitable organisations and that the impact of VAT on their activities will increase their total tax load. As an example, I refer to a typical Red Cross branch and the extra expenses it will incur if charitable bodies are not included in the Clause.
The Government are encouraging voluntary organisations to operate in support of the statutory health and social services and yet, if charitable bodies are not included in the Clause, extra expenses will be incurred by them. In the case of the Red Cross, the cost of training will bear VAT. The provision of uniforms, which are normally paid for by the volunteers, will be subject to VAT. A large number of aids for disabled people are provided from Red Cross funds, and they will be subject to VAT. The concessions which my right hon. Friend has made on capital gains tax and estate duty will not have the same benefit for the Red Cross as they will have for many other charitable organisations because many Red Cross branches rely on the donation of very small sums collected by door-to-door means or by people giving a little each month. They receive very few large bequests from wealthy donors on their death.
The second reason why I do not like the omission of charitable organisations


from the Clause is the inequitable position in which voluntary organisations will be placed compared with local authorities. The non-business activities of local
authorities which will be excluded from VAT include the conduct of schools, children's homes and welfare services for old people. Maintained schools will get a VAT refund and independent schools will not. Children's homes maintained by local authorities will not attract VAT, yet children's homes sponsored by the Red Cross and other voluntary associations will attract it. Local authority old people's homes will be exempt from the effects of the tax, yet homes established by voluntary bodies for old people, the sick and the infirm will attract VAT.
I congratulate my right hon. Friend on what he has done, but the concessions that he has already made will not be fairly shared between all voluntary bodies and in the long run charities will be worse off.

Mr. John Gorst: I agree entirely with the points already made by my hon. Friends the Members for Tiverton (Mr. Maxwell-Hyslop), Oxford (Mr. Woodhouse) and Tynemouth (Dame Irene Ward) and with nearly all of what was said by the hon. Members for Putney (Mr. Hugh Jenkins) and Portsmouth, West (Mr. Judd). The fact that there is so much agreement between both sides of the House indicates that there is no monopoly of compassion or concern abut the rôle of charities in our society. I remind my hon. and right hon. Friends that self-help, self-reliance and voluntary service are matters in which the Conservative party takes a particular interest.
In my constituency there is in the John Groom home for disabled people a truly remarkable, devoted and effective charitable organisation, and no doubt there are similar organisations throughout the country. That type of organisation will have a difficult time if we adopt the attitude which my right hon. Friend urged us to take in his earlier intervention.
The Chancellor seemed to be saying that we should let the charities show the adverse effect of VAT on their charitable activities and if they make out a case something will be done about it. I would prefer him to take the other attitude; let the Chancellor show that a

significant breach in the principle, the practice and the logic and equity of this exemption occurs, and let him do something about that. The Board of Customs and Excise is not noted for its readiness to make concessions or to keep records which are contrary to its arguments and the purity of its protection of the revenue. Most of us have experience which supports this.
Let us not be selective at this stage but rather at a later stage in the light of evidence that the Board of Customs and Excise or others in the Treasury are able to produce on the viability of VAT, on abuse or on any anomalies which may arise during the next 12 months. Any tax on charity is a disincentive to assistance being given in a selfless fashion. If "charity" is wrongly defined, as my hon. Friend the Member for Oxford said, let it be given a new definition later, but I urge the Chancellor to think again about what he does now.

10.30 p.m.

Mr. Healey: The hon. Member for Hendon, North (Mr. Gorst) was right when he said that the speeches in this debate have shown that there is no monopoly of concern for the situation of charities under the VAT. The question is whether there is a monopoly on one side of the House of the will to do something about it.
In what he said earlier, the Chancellor of the Exchequer was profoundly disappointing, and that disappointment must have been felt especially by those hon. Members opposite who share the concern of the hon. Member for Hendon, North. The right hon. Gentleman made no attempt to suggest—indeed, how could he—that the charities will not suffer to some degree by the application of VAT to their inputs. He made no attempt to suggest that there would not be hundreds perhaps thousands of charities which would not benefit from the disaggregation concession that he made yesterday. All that he attempted to argue was that charities as a whole—all the 100,000 that there may be in the country at present—are likely—though he could not prove this—to gain more than they would lose from the total package of measures. Probably he is right about that. But he had to admit that it was impossible to calculate the advantage to the charities from


the concessions on estate duty and capital gains.
No doubt the right hon. Gentleman was right to say that all the representatives of charities whom he had met applauded his actions in this respect. But I challenge him to deny that every single charity has opposed the application of VAT to their concerns. I am not aware of any charity in the country which does not support the general sense of these Amendments.
The snag about the right hon. Gentleman's argument is that, as he readily admitted, there will be many charities individually which lose a great deal more than they gain from the total package. I do not deny that there are some which will gain a great deal more than they lose. But we are concerned with those charities which cannot expect
to derive great benefit from a large increase in the number of legacies and gifts that they receive from wealthy people in the same way that certain other charities will benefit. Shelter was quoted as one organisation which is not likely to benefit on balance, and I quoted a couple of Church of England charities in my opening remarks.
What was most disappointing of all was the right hon. Gentleman's total failure even to address himself to the impact of VAT on the inputs for churches, especially in respect of repair and maintenance. In effect, the right hon. Gentleman accepted the figures that the Church of England and other churches have given of the total impact upon them, and the figures are best illustrated in real life not by the large total sums falling on the churches but by the additional cost to the average parish in the Church of England of £200 a year, which is a very substantial additional cost for many parishes.
All that the right hon. Gentleman could offer on churches, as the Financial Secretary did last night, was that it might be possible to contrive a means by which those which qualified as historic churches could get additional assistance. But the right hon. Gentleman knows as well as I do that the great majority of churches in the country, in all the main denominations, cannot qualify as historic churches without a gross breach of the normal rules of English.
The right hon. Gentleman did not suggest in anything that he said, and nor did the Financial Secretary last night, that a concession on historic churches would meet the main concern which has been expressed in public and in private again and again over the past year by those responsible for the finances of our churches. Nor did the right hon. Gentleman attempt for a moment, as the Financial Secretary did unconvincingly, to explain why the Government could not accept the Amendment last night which would have relieved all churches at a stroke from VAT on repair and maintenance. He made no attempt to argue that this relief could not be given to the churches without giving it to everyone else. But he has made concessions on television rentals. He has made concessions on children's shoes without making concessions on children's clothes. He could perfectly well have done something similar in this case, or he could have achieved the same result by accepting this Amendment to return inputs to churches in the same way as he has to the BBC, the ITN, local authorities and a whole range of other bodies.
The Chancellor admitted that some charities might suffer heavily as a result of the imposition of VAT; but all he offered, if they did, was that they could talk to the Customs and Excise and something might be done about it. Of course, the rest of his argument was devoted to showing that it was impossible to do anything about it. Otherwise, he would be accepting the Amendment.
The Chancellor's only argument against doing anything about his situation, in the sense of the Amendment—namely, the refund of inputs—was that it would impose a great administrative burden. However, he could reduce that administrative burden in innumerable ways. Indeed, if he means what he says about helping charities which suffer, he will have to do so when he comes back to the House, if he ever does.
This argument is about imposing a tax on charity, a tax on compassion, a tax on those bodies in this country which are working not for themselves, but for others, and a tax on those who help those bodies to help others rather than themselves.
The right hon. Gentleman would not discuss the amount involved. It must be


something over £1½million, but not very much; and certainly if he chose to make the concession to the churches alone it would be only £1½ million.
I believe the Chancellor must be profoundly distressed at his total failure to meet what is clearly the desire of hon. Members on both sides who have spoken in the debate. I hope he is slightly ashamed that he has not produced one argument to justify his failure to meet that desire.

For these reasons, I ask the House to divide on this Amendment. I hope that hon. Members on both sides of the House who have spoken so bravely for the charities will demonstrate that they mean what they say by voting in the Division Lobbies.

Question put, That the Amendment be made: —

The House divided: Ayes 169, Noes 181.

Clause 38

OFFENCES AND PENALTIES

Mr. Ivor Stanbrook: I beg to move Amendment No. 176, in line 24, leave out subsection (3).

Mr. Deputy Speaker: With this Amendment we can take also the following Amendments:

No. 112, in page 27, line 26, leave out from 'section' to 'he' in line 28.

No. 113, in line 29, after 'or', insert 'if greater'.

Mr. Stanbrook: I shall be a little time. [Hon. Members: "Oh."] I hope that hon. Members will stay and listen to the discussion on an important matter.
I am grateful for this opportunity of raising a matter which was discussed in Standing Committee, because I believe that my right hon. and hon. Friends have not given sufficient consideration to this matter and to the arguments which were advanced against the subsection in Committee. The subsection violates a principle of English law, that a man is entitled to have reasonable particulars of any charge made against him. The subsection has encountered the united opposition of the Bar Council and the Law Society.
The Clause raises three elements. Subsection (1) deals with the offence of fraudulent evasion of tax. Subsection (2) deals with the furnishing of false documents or false information with intent to deceive. These two offences have respectable precedents in English criminal law, are well understood and do not in

any way derogate from the general principles of the criminal law as we understand them.
But the effect of subsection (3) is that a defendant will be guilty of either of the two preceding offences not merely if he must have committed them—because that, after all, is the inherent meaning of subsections (1) and (2)—but if he must have committed them whether or not the particulars of the offence are known. Therefore, a strange and repulsive idea, foreign to all English law, creeps into our jurisprudence under cover of an apparently innocuous Bill dealing only with public finance. [Hon. Members: "Innocuous?"] The Bill has many merits. So I say, more in sorrow than in anger, that the subsection is viciously objectionable.
It is a proud tradition of English law that every defendant at every criminal trial is entitled—andthe trial cannot otherwise proceed—to know, first, the offence alleged against him and, secondly, the facts upon which that alleged offence is based. Every indictment must contain thost two elements or it is invalid and will be struck out, or particulars amending it will be ordered. The subsection abrogates that principle by making it unnecessary, if it is inconvenient, because the prosecution does not happen to have the particulars of the offence, to give the particulars upon which the alleged offence is based.
I understand that in Standing Committee my hon. Friend said, in effect that in some cases it would be difficult for the prosecution to prove the offences embodied in Clause 38, but this is the common complaint on the part of the prosecution where there is insufficient evidence to convict. It is a complaint commonly heard where there have been acquittals. But this is how we run our trials at the moment, requiring sufficient evidence to prove an offence, and there is no excuse for depriving British citizens of what has been hitherto an inalienable right.
If there is evidence, it should be possible, and indeed necessary, to supply it, and to proceed against the alleged offender under subsection (1) or (2), but if there is so little evidence that the particulars are not known it would be wholly wrong to ask the court to convict on a logical probability unsupported by facts.


If my hon. Friend is not convinced by that argument, perhaps I may put to him another, practical, argument. If the subsection is passed, the first court which has to
apply it in relation to an offence alleged to have been committed under it may have to entertain an application for particulars. If that court relies upon the fundamental principle of the British constitution rather than on this Statute, that court may order particulars to be given. We may then find for the first time in centuries, perhaps, that the courts and Parliament are at loggerheads, and all this at the behest of Treasury mandarins who know not Dicey.
I hope that my hon. Friend will think again about this matter and act to avoid what may be a dreadful prospect.

11.0 p.m.

Mr. Healey: I strongly support the Amendment, not least because I moved the same Amendment in Standing Committee and I am glad that it has been possible to raise the matter on Report.
This Clause puts hon. Members on this side of the House in somewhat of a difficulty because none of us wishes to see any criminal escape justice, least of all a man who willingly, knowingly, and illegally evades tax due, but at the same time we find it impossible to justify a total breach of all the legal traditions on which this democracy has rested for many centuries.
The question one has to ask oneself, therefore, is how is it that the Government have felt it necessary to introduce what they frankly admitted in Committee is a total reversal of our legal traditions and an inovation, as the Financial Secretary rather moderately put it, which has no precedent in any other law, as he frankly confessed upstairs.
The way in which the Government propose to enforce value added tax is impossible to understand, unless one recognises some of the monstrous fortuity of the tax as a means of raising no more money than is raised by the taxes it replaces—purchase tax and selective employment tax. We have to recognise that this tax affects 2 million people as against purchase tax, which it replaces in the main, which affects only 65,000 people.
In this Clause the Government are seeking power to inflict a penalty of at least £1,000 without establishing when the offence was committed, where it was committed or even—and I quote the Financial Secretary in Standing Committee—"what precisely the offence was".

Mr. Higgins: Will the right hon. Gentleman kindly give the column reference?

Mr. Healey: If the hon. Gentleman will allow me, I undertake to do so in a moment.

Mr. Higgins: The right hon. Gentleman said that he quoted me and gave a precise expression and I should like to know the column reference.

Mr. Healey: At column 851 of Standing Committee E of the Official Report for 14th June, the hon. Gentleman said that difficulties would often arise
such as the place where the offence was committed, the precise amount, and so on
and he referred several times to the question of time.

Mr. Higgins: With great respect, that is not what the right hon. Gentleman said a moment ago that I said, and he should withdraw it.

Mr. Healey: All right. If the hon. Gentleman thinks that what I said he said was inconsistent with what he said, I withdraw it, but the House should know precisely what he said, because it is at least as shocking as what I quoted. He said that difficulties could relate to times.
Similar difficulties can arise, although not as frequently, with regard to other considerations, such as the place where the offence was committed, the precise amount, and so on."—[Official Report, Standing Committee E, 14th June, 1972; c. 851.]
In other words, he is claiming the right and inflicting on our courts the duty to sentence people to what are moderately Draconian fines without knowing where the offence was committed, when it was committed or the amount concerned in the offence.
The House will recognise that these are monstrous changes in our legal tradition. It is very important that one should try to understand why they take place. I hope that I shall not be out of order in saying that it has been well pointed out


in a letter in The Times today that in many cases a man will be tried for this unspecified offence, committed at an unknown place and time, by computer because a certificate provided by the Inland Revenue will be presented as evidence and will have to be accepted as evidence unless it is disproved by the man who is in the dock, even if a representative of Customs and Excise is not present at the trial.
It is truly an astonishing situation. This value added tax will make compulsive and compulsory form-fillers out of 2 million people, most of whom have never had to fill in a form of this type in their life, in order to give Customs and Excise details of thousands of millions of transactions every year. Secondly, in another part of the Bill the Government seek unprecedented powers to violate the privacy of these individuals in order to find out whether the information they have given is accurate and complete.
The Government are planning to spend at least £16 million on employing up to 8,000 additional civil servants to administer the Act. Yet the Government have so little confidence that this mass of additional civil servants can handle evasion on the scale on which it is likely to take place that they have decided to extend the limits of the law and reverse some of the most fundamental traditions by which our courts have been guided since the Middle Ages.
I shall not weary the House by quoting again what has been said of this provision by the Chairman of the Bar Council and by other distinguished lawyers, both in the courts and in the Confederation of British Industry, and elsewhere. But none of this was necessary under the taxes which VAT replaces, purchase tax or selective employment tax, because in those cases the Government were rightly confident that if evasion took place, the courts could either convict a man with provision of full details of the nature of the offence, when and where it was committed and the amount concerned, or, if there were difficulty in establishing precise details in this way, they could convict a man on charges of conspiracy or intent to defraud.
The Financial Secretary claimed that it was impossible or undesirable to limit the power of enforcement under VAT in the way in which the powers of enforcement were limited under purchase tax and SET, because, he claimed, it would save the time of the courts if they were able to convict without knowing the offence of which the man was guilty. That is what the hon. Gentleman argued. He said that the Government did not want to have to prosecute people for conspiracy because it would be so unfair to them and because the penalty might be higher than the penalty we are establishing now. He said that the Government were doing them a favour by finding them guilty of offences whose precise nature we cannot prove and do not know, because at least the penalty they will suffer when found guilty will be less than they would have received under the law of this land as it has been known until now.
This gross violation of British legal traditions has clearly been required by the Government because, with 2 million taxable persons and a tax full of anomalies, they expect evasion on such a colossal scale that it would be impossible for the courts to try all the cases and to convict all those who are likely to be guilty of offences unless they breached the law and sought short cuts by having the power to convict without detailed knowledge of the offence.
We on this side regard the tax itself as a damaging irrelevance, and particularly damaging to the Chancellor's own economic policy at this time, since at the moment when inflation is the central problem facing the economy, failure to solve which forced the Government to devalue the £ a fortnight ago, they are introducing a tax which raises no more than the tax which precedes it but which is certain to send up the cost of living when it comes in next April by at least 1 per cent., and probably by 2 or 3 per cent.
On top of that tax, which, as I say, is a damaging irrelevance, highly damaging in the inflationary situation in which we find ourselves, the Government have decided that they cannot operate and enforce the tax without overthrowing some of the jealously guarded traditions of the British law.
I appeal to all hon. Members on both sides, whatever their views may be on the value added tax in general, to reflect carefully on what the hon. Member for Orpington (Mr. Stanbrook) said and, I hope, on what I have said, and then, when we have heard what the Financial Secretary has to say, unless it is very different from what he told us in Standing Committee, to carry their convictions into the Lobby.

Mr. Maxwell-Hyslop: I admit that I had not come across this Clause before. Indeed, if I had not been sitting here tonight when the Amendments were called, I should have been unaware of it. I must say that it reads to me like the sort of Clause one would expect to find in current Greek legislation, not in current British legislation. I am amazed to see such a thing imported into British legislation. If one substituted 1 million drachmae for the £1,000, this could be a translation from current Greek legal practice.
I ask the House to look again at subsection (3):
Where a person's conduct during any specified period…
That could be 20 years before the Clause is passed; it could be entirely retrospective. It could read:
Where a person's conduct during any specified period must have involved the commission by him of one or more offences under the preceding provisions of this section, then, whether or not the particulars of that offence or those offences are known, he shall, by virtue of this subsection, be guilty of an offence and liable to a penalty of 1 million drachmae, or three times the amount of any tax that was or was intended to be evaded by his conduct, or to imprisonment for a term not exceeding two years, or to both.
What are the offences covered by subsection (1)?:
If any person is knowingly concerned in…
and so on.
Next, subsection (2):
If any person with intent to deceive…
and so on.
How on earth is the court to know whether there was an intent, not just whether certain events happened but whether an evil intent was present, if so little is known about it by the prosecution that it cannot even draw up specific charges under Clause 38(1) or (2)?
It is utterly repugnant to me, and I hope that all hon. Members present will go into the Division Lobby to make sure that this sort of Clause does not find its way into legislation which the House of Commons is minded to pass.

Mr. Higgins: May I refer first to Amendment No. 113, which is being taken in this group? This is a technical drafting Amendment produced in response to the undertaking given in Committee to look at the penalty specified in subsection (3) and to consider whether it might be clarified.
Throughout the Clause there is an unqualified mandatory penalty provided as an alternative to the variable mandatory penalty based on the tax evaded with the multiplier. The intention is that the applicable maximum penalty shall be the greater of the two in any particular case and this is clearly expressed in subsections (1), (4) and (5) but was, by an oversight, ommitted from subsection (3). It is expedient that the penalty under subsection (3) should be in line with the other penalty provisions of the Clause and therefore the Amendment should be made. If the House wishes I shall go into it in greater detail.

11.15 p.m.

Mr. Healey: I am glad that all parts of the Clause will be brought into line. The Financial Secretary will recall that we argued for about half an hour in Standing Committee that the meaning of the Clause was that £1,000 would be the maximum penalty and it might be possible to inflict less. The Amendment which he has just introduced makes it crystal clear that it is a minimum penalty and that a man can be fined more if three times the tax evaded is more than £1,000. I hope that the Financial Secretary will admit that he was innocently mistaken in the meaning which he attached to the Clause in Standing Committee.

Mr. Higgins: I readily admit that there was a deal of detailed discussion in Standing Committee in which there were two points. One was the question whether there should be one penalty or the other and this is the point which is covered by the Amendment. The other question, which was separate was, whether the figures specified in the Clause-were or were not a maximum penalty.


The Amendment is concerned with the first question. It is a drafting point. I saw at the time that I was unhappy about the way in which it was drafted and as a result of our Standing Committee discussion I undertook to look at it. The Amendment is the result of the consideration we gave to the matter.
There was also the question whether the figures specified in the Bill were or were not maximum penalties. The matter arose again in the Committee when the right hon. Member for Leeds, East (Mr. Healey) had left the Committee. I then referred at a later stage to the fact that although it was normal in legislation to specify a specific figure under the Customs and Excise Act, 1952, the courts had discretion—I am not a lawyer but I think this is the technical expression—to mitigate the penalty as they saw fit. Therefore the figure which was specified effectively became a maximum.
That is the position. It is not a point covered by the Amendment, which is a technical drafting Amendment made in response to the first point the hon. Member made in Standing Committee. His second point was not a matter for concern, but one could understand that the right hon. Gentleman thought it right to press it on that occasion. The point is covered by the other legislation which is referred to in the Bill. I hope that that makes the position crystal clear and I hope that the House will think it right to accept Amendment No. 113.
I turn to the broader issue raised by my hon. Friend the Member for Orpington (Mr. Stanbrook) and the right hon. Member for Leeds, East. In considering the overall position of the value added tax my right hon. Friends and my other Treasury colleagues were naturally concerned that the tax should be effectively collected. But we were also extremely concerned that the enforcement provisions should not be more onerous than necessary.
In that respect the proposals which originally came before us were considerably modified as a result of the deliberations that my right hon. Gentleman and other Treasury Ministers gave to them. We then published the Clauses of the Bill immediately after the Budget, and further discussions have taken place with various interested parties, including legal

authorities, hon. Members and so on. As a result of those discussions, and of the scrutiny which the Committee gave to the Bill, we have made a number of Amendments. We made substantial alterations in the original enforcement provisions, and in a later Amendment to Clause 40 we make a major change.
It would be wrong to suppose that we had entered into the provisions without giving them the most careful scrutiny and the deepest thought. The right hon. Gentleman is at times inclined to engage in irresponsible hyperbole. He grossly overstated his case in some respects tonight. I do not wish to take up the political points he made in passing, on the cost of living and so on. There is genuine concern about the changes made in the Clause, and I should be the first to agree that it is right that they should have been carefully scrutinised, both upstairs and now.
As reported from column 849 onwards of the Official Report of the Committee proceedings, I sought on 14th June to set out the broad provisions of the Clause and the reasons why we believed it right to include it in the Bill. In the earlier stages of the debate upstairs we had given considerable attention to the fact that it includes words saying that an offence must have been committed. It is within that context that we should look at the provisions in the Clause.
In that respect we need to get the provision into perspective. The only persons affected will be those whose conduct
must have involved the commission…of one or more offences".
The result of inadequate enforcement powers must be tax evasion, and loop-holes for the unscruplous or wilfully negligent trader to secure competitive advantages over the honest and conscientious. I do not think that that is something the House would wish to encourage. The provision is, in brief, designed to cover the case where it can be proved that an offence has been committed but it is not clear to what extent it was committed in any particular accounting period within the total period concerned.
We gave considerable attention to these provisions upstairs, where we took as the prime example the difficulty which has been known to arise in purchase tax cases, in which an offence is known


to have been committed over a period but it might have covered a number of different accounting periods.
The subsection is not aimed at relatively minor offences by small taxpayers. Its need has been demonstrated in purchase tax cases, where, over the years, frauds have increased in scale and complexity. The lack of such a provision has meant that certain purchase tax prosecutions have cost more in time and money, and have been tried in a higher court, than either the defence or the prosecution would have wished.
The provision is designed to offer benefits to both prosecution and defence in relatively serious cases of tax evasion, and to say the time of the courts. We went at some length into the purchase tax position upstairs. The provision will save a great deal of unnecessary cost, but it will in no way prejudice the right to contest a case before judge and jury if that were the wish of the defence.
I am anxious not to weary the House by rehearsing the discussions in Committee upstairs, but it should be borne in mind that anyone against whom proceedings under this subsection could be taken would be prosecutable for something else, probably conspiracy or a multiplicity of offences. That is what has tended to happen in purchase tax cases. Generally speaking, these prosecutions have been based either on conspiracy or on a multitude of offences.
Prosecution for conspiracy often causes concern—I see my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) nodding his head—because, even though prosecution and defence might prefer a summary trial, conspiracy cases are triable only on indictment, which again involves additional costs for both sides and consumes a great deal of the court's time. Further, since it is a common law offence, conspiracy carries a theoretically unlimited penalty. Further, the prosecution can, I am advised, adduce evidence which would be inadmissible in proceedings for an ordinary offence.
All this being so, it seems to us that to recapitulate the position that has existed on purchase tax cases would not be preferable to the course we have put forward in the Clause. The new approach provided by the subsection

should lead to considerable savings in the courts' time without eroding any legitimate rights which the defence would have under alternative methods of proceedings. The defence will be able to elect for trial on indictment, if it so wishes, and will know from the outset the maximum penalties on each charge.
I dealt with the matter at considerable length upstairs, and I am not sure to what extent the House would wish me again to go over that ground. That is the broad position. We believe that the provision is necessary for the enforcement of the tax. It has been given considerable thought and a great deal of examination, and in the light of that we think it would be right to reject the Amendment and to leave the Clause as it stands.

Mr. Charles Fletcher-Cooke: I had understood that the Report stage was to enable those hon. Members who did not have the privilege of serving in Committee upstairs to acquaint themselves with some of the difficulties that have arisen. If in the course of my brief remarks I show my ignorance of what has happened in Committee upstairs I hope that I shall be forgiven. Report stage should be more than a mere formality, particularly when, as my hon. Friend the Member for Orpington (Mr. Stanbrook), who moved the Amendment with such eloquence, said, fundamental principles are at stake.
Much as I appreciate the brilliance on the Treasury Bench of my hon. Friend the Financial Secretary, whom I have admired for many years, my mind goes back to the days when on a matter like this it was common form for the Solicitor-General to reply. If it was not Lord Stow Hill, it was Lord Dilhorne; if it was not Lord Simon of Glaisdale, it was Sir Harry Hylton-Foster. We are concerned with a serious departure from the criminal law, something which, as the right hon. Member for Leeds, East (Mr. Healey) said in a rasping manner, was not fundamentally necessary for purchase tax but is now apparently found necessary for the tax that replaces it, namely, that particulars of offences are not merely not to be given; they are not to be known. It is simply that over a period it is thought that an offence must have been com-


mitted, but particulars cannot be given because they are not known. That is very strange.
My misgivings are not altogether allayed when my hon. Friend, no doubt with the best of motives, says that to give particulars would involve unnecessary costs. Whenever one hears that as a reason given by the bureaucracy one's hackles rise.

11.30 p.m.

Mr. Higgins: With respect, I do not think that I said that to give particulars would create unnecessary costs. I was seeking to show that the procedures adopted for purchase tax—particularly if the case is brought on grounds of conspiracy—have often led to a situation in which the case has been pursued to a higher level than otherwise would have been necessary or than either party would have wished and that, as a result, overall costs were higher.

Mr. Fletcher-Cooke: That raises the point about conspiracy. My hon. Friend was good enough to say that I nodded in the course of his speech. So I did; but it was not in agreement with what he said. I was nodding agreement at the well-known rule of law that it is no good charging a conspiracy when what one means to do is to charge the substantive offence. That is the easy way out, and a great deal of dicta from the Bench have disapproved of that.
The executive are now saying, "Because we are not allowed to charge the conspiracy when we should charge the substantive offence, because it is easier to charge the conspiracy we shall alter the rules relating to the substantive offence." That is flouting the dicta of the judges in a big way. They say, "You must charge the conspiracy because the machinery of conspiracy is much easier to prove. You must prove the details of a particular offence if you suspect that it has been committed." But now the rules are to be changed to equate the offence with the conspiracy. That is the burden of my hon. Friend's Amendment.
If it would not be necessary in the case of purchase tax I do not see why

it is necessary for VAT. I am a supporter of VAT. Much of what my hon. Friend said—and it was out of order on a technical Amendment—is neither here nor there. Nevertheless, it does not encourage those who support VAT to find that the rules relating to enforcement are being changed.
Therefore, although I appreciate that my hon. Friend has met a great number of objections, relating to the form of the indictment, the form of the prosecution and the form of the appeals, the words stick in my gullet—
whether or not the particulars of that offence or those offences are known
and therefore perhaps cannot be supplied. There being no stages of a Finance Bill in another House, my appeal to my hon. Friend is a theoretical one. I put down no more than a marker to show that although we shall allow the executive this far, we shall allow them no further.

Mr. Healey: As the hour is late, I shall be brief. I accept Amendment No. 113. I recognise that it is in response to some points which we raised in Standing Committee. On the major matter, however—Amendment No. 176—the Financial Secretary added nothing to what he told us upstairs, and what he told us there was very disturbing: that is, that he is prepared to bend the processes of law to save time and expense to the courts. The reason why he has to save time and expense for the courts is that he expects value added tax to involve prosecutions on so much greater a scale than the taxes it replaces that, even with the enormous administrative expense to which he has committed himself, he does not feel it possible to enforce the tax without breaking the traditions of our law.
For these reasons I ask my hon. Friends—and, indeed, those on the Government side who have expressed concern—to vote for the Amendment.

Question put, That the Amendment be made: —

The House divided: Ayes 153, Noes 164.

Division No. 290.]
AYES
[10.37 p.m.


Albu, Austen
Gourlay, Harry
Morris, Charles R. (Openshaw)


Allaun, Frank (Salford, E.)
Grant, George (Morpeth)
Mudd, David


Archer, Peter (Rowley Regis)
Grant, John D. (Islington, E.)
Mulley, Rt. Hn. Frederick


Atkinson, Norman
Griffiths, Will (Exchange)
Murray, Ronald King


Barnett, Guy (Greenwich)
Hamilton, James (Bothwell)
Oakes, Gordon


Barnett, Joel (Heywood and Royton)
Hamilton, William (Fife, W.)
Ogden, Eric


Baxter, William
Hardy, Peter
O'Halloran, Michael


Benn, Rt. Hn. Anthony Wedgwood
Harrison, Walter (Wakefield)
O'Malley, Brian


Bennett, James (Glasgow, Bridgeton)
Healey, Rt. Hn. Denis
Orbach, Maurice


Bidwell, Sydney
Heffer, Eric S.
Owen, Dr. David (Plymouth, Sutton)


Boardman, H. (Leigh)
Huckfield, Leslie
Paget, R. T.


Booth, Albert
Hughes, Mark (Durham)
Pannell, Rt. Hn. Charles


Bottomley, Rt. Hn. Arthur
Hughes, Robert (Aberdeen, N.)
Pavitt, Laurie


Bradley, Tom
Hughes, Roy (Newport)
Pentland, Norman


Broughton, Sir Alfred
Hunter, Adam
Prentice, Rt. Hn. Reg.


Brown, Robert C. (N'c'tle-u-Tyne, W.)
Irvine,Rt.Hn.Sir Arthur (Edge Hill)
Prescott, John


Brown, Ronald (Shoreditch &amp; F'bury)
Janner, Greville
Price, J. T. (Westhoughton)


Buchanan, Richard (G'gow, Sp'burn)
Jenkins, Hugh (Putney)
Reed, D. (Sedgefield)


Butler, Mrs. Joyce (Wood Green)
Jenkins, Rt. Hn. Roy (Stechford)
Rees, Merlyn (Leeds, S.)


Carmichael, Neil
John, Brynmor
Roberts, Albert (Normanton)


Carter, Ray (Birmingh'm, Northfield)
Johnson, Walter (Derby, S.)
Roberts, Rt.Hn.Goronwy (Caernarvon)


Clark, David (Colne Valley)
Jones, Barry (Flint, E.)
Robertson, John (Paisley)


Cocks, Michael (Bristol, S.)
Jones, T. Alec (Rhondda, W.)
Rodgers, William (Stockton-on-Tees)


Cohen, Stanley
Judd, Frank
Roper, John


Coleman, Donald
Kaufman, Gerald
Rose, Paul B.


Concannon, J. D.

Rowlands, Ted



Kelley, Richard
Sandelson, Neville


Cox, Thomas (Wandsworth, C.)
Lamond, James
Sheldon, Robert (Ashton-under-Lyne)


Crawshaw, Richard
Latham, Arthur
Short, Rt.Hn. Edward(N'c'tle-u-Tyne)


Crosland, Rt. Hn. Anthony
Lawson, George
Sillars, James


Dalyell, Tam
Lee, Rt. Hn. Frederick
Skinner, Dennis


Darling, Rt. Hn. George
Leonard, Dick
Spearing, Nigel


Davis, Clinton (Hackney, C.)
Lestor, Miss Joan
Spriggs, Leslie


Davis, Terry (Bromsgrove)
Lewis, Ron (Carlisle)
Stallard, A. W.


Deakins, Eric
Lipton, Marcus
Stewart, Donald (Western Isles)


de Freitas, Rt. Hn. Sir Geoffrey
Loughlin, Charles
Stewart, Rt. Hn. Michael (Fulham)


Dempsey, James
Mabon, Dr. J. Dickson
Stoddart, David (Swindon)


Dormand, J. D.
McBride, Neil
Strang, Gavin


Douglas, Dick (Stirlingshire, E.)
McCartney, Hugh
Taverne, Dick


Duffy, A. E. P.
Mackenzie, Gregor
Thomson, Rt. Hn. G. (Dundee, E.)


Dunnett, Jack
Mackie, John
Urwin, T. W.


Eadie, Alex
Mackintosh, John P.
Varley, Eric G.


Edelman, Maurice
Maclennan, Robert
Wainwright, Edwin


Edwards, Robert (Bilston)
Mahon, Simon (Bootle)
Walden, Brian (B'm'ham, All Saints)


Edwards, William (Merioneth)
Marks, Kenneth
Watkins, David


English, Michael
Marquand, David
Wellbeloved, James


Evans, Fred
Marsden, F.
Whitehead, Phillip


Ewing, Harry
Marshall, Dr. Edmund
Whitlock, William


Farr, John
Mason, Rt. Hn. Roy
Williams, Alan (Swansea, W.)


Faulds, Andrew
Maxwell-Hyslop, R. J.
Williams, W. T. (Warrington)


Fisher,Mrs. Doris(B'ham,Ladywood)
Mayhew, Christopher
Wilson, Alexander (Hamilton)


Fitch, Alan (Wigan)
Meacher, Michael
Wilson, William (Coventry, S.)


Fletcher, Ted (Darlington)
Mellish, Rt. Hn. Robert
Winterton, Nicholas


Forrester, John
Mendelson, John
Woof, Robert


Garrett, W. E.
Millan, Bruce



Gilbert, Dr. John
Miller, Dr. M. S.
TELLERS FOR THE AYES:


Golding, John
Mitchell, R. C. (S'hampton, Itchen)
Mr. Joseph Harper and


Gordon Walker, Rt. Hn. P. C.
Morgan, Elystan (Cardiganshire)
Mr. Ernest Armstrong.


Gorst, John






NOES


Adley, Robert
Fowler, Norman
Neave, Airey


Alison, Michael (Barkston Ash)
Fox, Marcus
Nicholls, Sir Harmar


Allason, James (Hemel Hempstead)
Fry, Peter
Normanton, Tom


Atkins, Humphrey
Gilmour, Sir John (Fife, E.)
Nott, John


Awdry, Daniel
Glyn, Dr. Alan
Oppenheim, Mrs. Sally


Baker, Kenneth (St. Marylebone)
Goodhart, Philip
Osborn, John


Balniel, Rt. Hn. Lord
Goodhew, Victor
Owen, Idris (Stockport, N.)


Barber, Rt. Hn. Anthony
Gower, Raymond
Page, Rt. Hn. Graham (Corby)


Batsford, Brian
Grant, Anthony (Harrow, C.)
Page, John (Harrow, W.)


Beamish, Col. Sir Tufton
Gray, Hamish
Pink, R. Bonner


Benyon, W.
Green, Alan
Powell, Rt. Hn. J. Enoch


Biffen, John
Grylls, Michael
Price, David (Eastleigh)


Biggs-Davison, John
Gummer, J. Selwyn
Proudfoot, Wilfred


Blaker, Peter
Hall, Miss Joan (Keighley)
Pym, Rt. Hn. Francis


Boardman, Tom (Leicester, S.W.)
Hall, John (Wycombe)
Raison, Timothy


Boscawen, Robert
Harrison, Brian (Maldon)
Ramsden, Rt. Hn. James


Bowden, Andrew
Havers, Michael
Redmond, Robert


Bray, Ronald
Hawkins, Paul
Reed, Laurance (Bolton, E.)


Brewis, John
Higgins, Terence L.
Renton, Rt. Hn. Sir David


Brinton, Sir Tatton
Hill, John E. B. (Norfolk, S.)
Ridley, Hn. Nicholas


Bruce-Gardyne, J.
Hill, James (Southampton, Test)
Rippon, Rt. Hn. Geoffrey


Bryan, Sir Paul
Holland, Philip
Roberts, Wyn (Conway)



Hordern, Peter
Rodgers, Sir John (Sevenoaks)


Buchanan-Smith, Alick(Angus,N&amp;M)
Hornby, Richard
Rossi, Hugh (Hornsey)


Buck, Antony
Hornsby-Smith,Rt.Hn.Dame Patricia
Rost, Peter


Burden, F. A.
Howell, Ralph (Norfolk, N.)
Sharples, Sir Richard


Butler, Adam (Bosworth)
Hunt, John
Shaw, Michael (Sc'b'gh &amp; Whitby)


Carlisle, Mark
Iremonger, T. L.
Shelton, William (Clapham)


Carr, Rt. Hn. Robert
Irvine, Bryant Godman (Rye)
Skeet, T. H. H.


Chapman, Sydney
James, David
Smith, Dudley (W'wick &amp; L'mington)


Chataway, Rt. Hn. Christopher
Jenkin, Patrick (Woodford)
Soref, Harold


Chichester-Clark, R.
Kellett-Bowman, Mrs. Elaine
Spence, John


Clark, William (Surrey, E.)
Kimball, Marcus
Stainton, Keith


Clarke, Kenneth (Rushcliffe)
King, Evelyn (Dorset, S.)
Stanbrook, Ivor


Clegg, Walter
King. Tom (Bridgwater)
Stewart-Smith, Geoffrey (Belper)


Cockeram, Eric
Kinsey, J. R.
Stoddart-Scott, Col. Sir. M.


Cooke, Robert
Kirk, Peter
Stokes, John


Cooper, A. E.
Knight, Mrs. Jill
Taylor, Frank (Moss Side)


Cordle, John
Knox, David
Taylor, Robert (Croydon, N.W.)


Corfield, Rt. Hn. Sir Frederick
Lambton, Lord
Tebbit, Norman


Cormack, Patrick
Le Marchant, Spencer
Thatcher, Rt. Hn. Mrs. Margaret


Costain, A. P.
Lewis, Kenneth (Rutland)
Thomas, John Stradling (Monmouth)


Critchley, Julian
Lloyd, Ian (P'tsm'th, Langstone)
Thomas, Rt. Hn. Peter (Hendon, S.)


Crouch, David
Luce, R. N.
Thompson, Sir Richard (Croydon, S.)


Crowder, F. P.
MacArthur, Ian
Tilney, John


Dean, Paul
McCrindle, R. A.
Trew, Peter


Deedes, Rt. Hn. W. F.
McLaren, Martin
Turton, Rt. Hn. Sir Robin


Douglas-Home, Rt. Hn. Sir Alec
McNair-Wilson, Michael
van Straubenzee, W. R.


du Cann, Rt. Hn. Edward
McNair-Wilson, Patrick (New Forest)
Waddington, David


Dykes, Hugh
Maddan, Martin
Walder, David (Clitheroe)


Edwards, Nicholas (Pembroke)
Madel, David
Walters, Dennis


Elliot, Capt. Walter (Carshalton)
Mather, Carol
Ward, Dame Irene


Elliott, R. W. (N'c'tle-upon-Tyne,N.)
Mawby, Ray
Warren, Kenneth


Emery, Peter
Meyer, Sir Anthony
Weatherill, Bernard


Eyre, Reginald
Miscampbell, Norman
Wiggin, Jerry


Fenner, Mrs. Peggy
Moate, Roger
Wilkinson, John


Fidler, Michael
Monks, Mrs. Connie
Worsley, Marcus


Finsberg, Geoffrey (Hampstead)
Monro, Hector
Wylie, Rt. Hn. N. R.


Fisher, Nigel (Surbiton)
Montgomery, Fergus



Fletcher-Cooke, Charles
Morgan, Geraint (Denbigh)
TELLERS FOR THE NOES:


Fookes, Miss Janet
Morgan-Giles, Rear-Adm.
Mr. Oscar Murton and


Fortescue, Tim
Morrison, Charles
Mr. Michael Jopling.

Division No. 291.]
AYES
11.36 p.m.


Albu, Austen
Grant, John D. (Islington, E.)
Murray, Ronald King


Allaun, Frank (Salford, E.)
Griffiths, Will (Exchange)
Oakes, Gordon


Atkinson, Norman
Hardy, Peter
Ogden, Eric


Barnett, Guy (Greenwich)
Harper, Joseph
O'Halloran, Michael


Barnett, Joel (Heywood and Royton)
Harrison, Walter (Wakefield)
O'Malley, Brian


Benn, Rt. Hn. Anthony Wedgwood
Healey, Rt. Hn. Denis
Oswald, Thomas


Bennett, James (Glasgow,Bridgeton)
Huckfield, Leslie
Owen, Dr. David (Plymouth, Sutton)


Bidwell, Sydney
Hughes, Mark (Durham)
Paget, R. T.


Boardman, H. (Leigh)
Hughs, Robert (Aberdeen, N.)
Pavitt, Laurie


Booth, Albert
Hughes, Roy (Newport)
Pentland, Norman


Bottomley, Rt. Hn. Arthur
Hunter, Adam
Prentice, Rt. Hn. Reg.


Bradley, Tom
Irvine,Rt.Hn.SirArthur(Edge Hill)
Prescott, John


Broughton, Sir Alfred
Janner, Greville
Price, J. T. (Westhoughton)


Brown, Bob (N'c'tle-upon-Tyne,W.)
Jenkins, Rt. Hn. Roy (Stechford)
Reed, D. (Sedgefield)


Brown, Ronald (Shoreditch &amp; F'bury)
John, Brynmor
Rees, Merlyn (Leeds, S.)


Carter, Ray (Birmingh'm, Northfield)
Jones, Barry (Flint, E.)
Richard, Ivor


Clark, David (Colne Valley)
Jones, T. Alec (Rhondda, W.)
Roberts, Albert (Normanton)




Roberts, Rt.Hn.Goronwy(Caernarvon)


Cocks, Michael (Bristol, S.)
Judd, Frank
Robertson, John (Paisley)


Cohen, Stanley
Kaufman, Gerald
Rodgers, William (Stockton-on-Tees)


Coleman, Donald
Lamond, James
Roper, John


Concannon, J. D.
Latham, Arthur
Rose, Paul B.


Cox, Thomas (Wandsworth, C.)
Lawson, George
Rowlands, Ted


Crawshaw, Richard
Leonard, Dick
Sandelson, Neville


Crosland, Rt. Hn. Anthony
Lestor, Miss Joan
Sheldon, Robert (Ashton-under-Lyne)


Dalyell, Tam
Lewis, Ron (Carlisle)
Sillars, James


Davis, Clinton (Hackney, C.)
Lipton, Marcus
Skinner, Dennis


Davis, Terry (Bromsgrove)
Loughlin, Charles
Spearing, Nigel


Deakins, Eric
Mabon, Dr. J. Dickson
Spriggs, Leslie


de Freitas, Rt. Hn. Sir Geoffrey
McBride, Neil
Stallard, A. W.


Dempsey, James
McCartney, Hugh
Stanbrook, Ivor


Dormand, J. D.
Mackenzie, Gregor
Stewart, Rt. Hn. Michael (Fulham)


Douglas, Dick (Stirlingshire, E.)
Mackie, John
Stoddart, David (Swindon)


Duffy, A. E. P.
Mackintosh, John P.
Strang, Gavin


Dunnett, Jack
Maclennan, Robert
Taverne, Dick


Eadie, Alex
McNamara, J. Kevin
Thomson, Rt. Hn. G. (Dundee, E.)


Edelman, Maurice
Mahon, Simon (Bootle)
Urwin, T. W.


Edwards, William (Merioneth)
Marks, Kenneth
Varley, Eric G.


English, Michael
Marquand, David
Wainwright, Edwin


Evans, Fred
Marsden, F.
Walden, Brian (B'm'ham, All Saints)


Ewing, Henry
Marshall, Dr. Edmund
Watkins, David


Faulds, Andrew
Mason, Rt. Hn. Roy
Wellbeloved, James


Fisher,Mrs.Doris(B'ham,Ladywood)
Maxwell-Hyslop, R. J.
Whitehead, Phillip


Fitch, Alan (Wigan)
Mayhew, Christopher
Williams, Alan (Swansea, W.)


Fletcher, Raymond (Ilkeston)
Meacher, Michael
Williams, W. T. (Warrington)


Fletcher, Ted (Darlington)
Mellish, Rt. Hn. Robert
Wilson, Alexander (Hamilton)


Forrester, John
Mendelson, John
Wilson, William (Coventry, S.)


Garrett, W. E.
Millan, Bruce
Winterton, Nicholas


Gilbert, Dr. John
Miller, Dr. M. S.
Woof, Robert


Golding, John
Mitchell, R. C. (S'hampton, Itchen)



Gordon Walker, Rt. Hn. P. C.
Morgan, Elystan (Cardiganshire)
TELLERS FOR THE AYES:


Gourlay, Harry
Morris, Charles R. (Openshaw)
Mr. Ernest Armstrong and


Grant, George (Morpeth)
Mulley, Rt. Hn. Frederick
Mr. James Hamilton.




NOES


Adley, Robert
Chapman, Sydney
Fletcher-Cooke, Charles


Allason, James (Hemel Hempstead)
Chataway, Rt. Hn. Christopher
Fortescue, Tim


Atkins, Humphrey
Chichester-Clark, R.
Fowler, Norman


Awdry, Daniel
Clark, William (Surrey, E.)
Fox, Marcus


Baker, Kenneth (St. Marylebone)
Clarke, Kenneth (Rushcliffe)
Fry, Peter


Balniel, Lord
Clegg, Walter
Gilmour, Sir John (Fife, E.)


Barber, Rt. Hn. Anthony
Cockeram, Eric
Goodhart, Philip


Batsford, Brian
Cooke, Robert
Goodhew, Victor


Benyon, W.
Cooper, A. E.
Gorst, John


Biffen, John
Cordle, John
Gower, Raymond


Biggs-Davison, John
Corfield, Rt. Hn. Sir Frederick
Grant, Anthony (Harrow, C.)


Blaker, Peter
Cormack, Patrick
Gray, Hamish


Boardman, Tom (Leicester, S.W.)
Costain, A. P.
Green, Alan


Boscawen, Robert
Critchley, Julian
Grylls, Michael


Bowden, Andrew
Crouch, David
Gummer, J. Selwyn


Bray, Ronald
Dean, Paul
Hall, John (Wycombe)


Brewis, John
Deedes, Rt. Hn. W. F.
Havers, Michael


Brinton, Sir Tatton
du Cann, Rt. Hn. Edward
Hawkins, Paul


Bruce-Gardyne, J.
Dykes, Hugh
Higgins, Terence L.


Bryan, Sir Paul
Edwards, Nicholas (Pembroke)
Hill, John E. B. (Norfolk, S.)


Buchanan-Smith, Alick(Angus,N&amp;M)
Elliot, Capt. Walter (Carshalton)
Hordern, Peter


Buck, Anthony
Emery, Peter
Hornby, Richard


Burden, F. A.
Eyre, Reginald
Hornsby-Smith,Rt.Hn.Dame Patricia


Butler, Adam (Bosworth)
Fenner, Mrs. Peggy
Howell, Ralph (Norfolk, N.)


Carlisle, Mark
Fidler, Michael
Hunt, John


Carr, Rt. Hn. Robert
Finsberg, Geoffrey (Hampstead)
Irvine, Bryant Godman (Rye)







James, David
Neave, Airey
Soref, Harold


Jenkin, Patrick (Woodford)
Nicholls, Sir Harmar
Spence, John


Jessel, Toby
Noble, Rt. Hn. Michael
Stainton, Keith


Kellett-Bowman, Mrs. Elaine
Normanton, Tom
Stewart-Smith, Geoffrey (Belper)


King, Evelyn (Dorset, S.)
Nott, John
Stoddart-Scott, Col. Sir M.


King, Tom (Bridgwater)
Oppenheim, Mrs. Sally
Stokes, John


Kinsey, J. R.
Osborn, John
Taylor, Frank (Moss Side)


Kirk, Peter
Owen, Idris (Stockport, N.)
Tebbit, Norman


Knight, Mrs. Jill
Page, Rt. Hn. Graham (Crosby)
Thomas, John Stradling (Monmouth)


Knox, David
Page, John (Harrow, W.)
Thomas, Rt. Hn. Peter (Hendon, S.)


Le Marchant, Spencer
Pink, R. Bonner
Thompson, Sir Richard (Croydon, S.)


Lloyd, Ian (P'tsm'th, Langstone)
Powell, Rt. Hn. J. Enoch
Tilney, John


Luce, R. N.
Price, David (Eastleigh)
Trew, Peter


MacArthur, Ian
Proudfoot, Wilfred
Turton, Rt. Hn. Sir Robin


McCrindle, R. A.
Pym, Rt. Hn. Francis
van Straubenzee, W. R.


McLaren, Martin
Raison, Timothy
Waddington, David


McNair-Wilson, Michael
Ramsden, Rt. Hn. James
Walder, David (Clitheroe)


McNair-Wilson, Patrick (NewForest)
Redmond, Robert
Walters, Dennis


Maddan, Martin
Reed, Laurance (Bolton, E.)
Ward, Dame Irene


Madel, David
Renton, Rt. Hn. Sir David
Warren, Kenneth


Mather, Carol
Ridley, Hn. Nicholas
Weatherill, Bernard


Mawby, Ray
Rippon, Rt. Hn. Geoffrey
Wiggin, Jerry


Meyer, Sir Anthony
Roberts, Wyn (Conway)
Wilkinson, John


Moate, Roger
Rodgers, Sir John (Sevenoaks)
Worsley, Marcus


Monro, Hector
Rossi, Hugh (Hornsey)
Wylie, Rt. Hn. N. R.


Montgomery, Fergus
Sharples, Richard



Morgan, Geraint (Denbigh)
Shaw, Michael (Sc'b'gh &amp; Whitby)
TELLERS FOR THE NOES:


Morgan-Giles, Rear-Adm.
Shelton, William (Clapham)
Mr. Oscar Murton and


Morrison, Charles
Skeet, T. H. H.
Mr. Michael Jopling.


Mudd, David
Smith, Dudley (W'wick &amp; L'mington)

Question accordingly negatived.

Amendment made: No. 113, in page 27, line 29, after 'or' insert 'if greater'.—[Mr. Higgins.]

Clause 30

ACCOUNTING FOR AND PAYMENT OF TAX

Mr. David Mitchell: I beg to move Amendment No. 195, in page 20, line 21, at end insert:
'In respect of goods of £15 or less in value the regulations shall not provide for a tax invoice to show value-added tax as a separate item'

Mr. Deputy Speaker (Mr. E. L. Mallalieu): With this we can conveniently discuss the following Amendments:

No. 196, in line 21, at end insert:
'In respect of goods of £25 or less in value the regulations shall not provide for a tax invoice to show value-added tax as a separate item'.

No. 197, in line 21, at end insert:
'In respect of goods to the value of £20 or less the regulations shall not provide for a tax invoice to show value-added tax as a separate item'.

Mr. Mitchell: I do not want to take much of the time of the House—[Interruption.] But, cashing in on the popularity which I seem to have engendered with that remark, may I say that in Committee we had a clear indication from the Financial Secretary that he was thinking of making invoices to the value of £10 or less in a more simple form, not having to show VAT as a separate item. I have a letter from the hon. Gentleman in which he says:
For small transactions up to £10 in value a less detailed form of tax invoice will be acceptable and this will not need to show the tax amount separately
We did not, however, have any discussion on the question—why £10? The Small Business Association is anxious that this should be aired because it is felt that a large number of shopkeepers will have to take on a lot of clerical assistants to deal with individual itemised value added tax invoices, and it is thought that a figure of £15 or £20 or £25 would better enable a large number of transactions to be carried through without increasing the added clerical work involved. I am sure that this is so straightforward that the Financial Secretary will be anxious to accept one of these Amendments. I have, therefore, given him the choice of three.

Mr. Higgins: I will not take much of the time of the House either.
The object of the Amendments, which are alternatives, is to provide that a taxable person cannot be required by regulations to issue a tax invoice—that is, a document which shows tax chargeable as a separate item—for a supply of goods of a value not exceeding one of several suggested amounts. The Amendments do not mention supplies of services, but this omission is probably unintentional.
One effect of the Amendments would be to increase the possibility that traders would make mistakes when claiming deduction of input tax, since they would have to work out for themselves the amounts of tax included in the overall prices charged by their suppliers for these small consignments. This will be a simple calculation if the standard rate of tax is 10 per cent. but could be much more difficult with a different rate. I will not provoke the House by suggesting which direction the rates might go under this Government and which direction they might go under the Labour Government. Mistakes could result in losses by the Exchequer or by taxable persons.
Another, and potentially more serious, effect would be to limit the Crown's power to recover tax from a person who issues a false or incorrect invoice, since Clause 33(2) applies only where an invoice shows tax as a separate amount.
A registered taxable person will normally have to issue a tax invoice for each taxable supply, other than a zero-rated supply,
that he makes to another taxable person, and to keep a copy of the invoice. These invoices will provide evidence of the tax payable by the supplier, as shown on his tax returns, and supporting evidence for the recipient's claim for deduction of input tax. It is essential that, except for small transactions, they should show clearly the amount of tax chargeable, so that the receipient will deduct neither more nor less than that amount.
A simplified system has been devised for retailers and other persons who mostly supply goods or services direct to the public and who do not normally issue invoices. They will not be required to issue tax invoices at all for supplies to the general public and even for supplies that they make to taxable businesses they will be allowed to issue less detailed tax


invoices than the normal ones if the value of the transaction is £10 or less. Such invoices will not need to show the tax charge separately and the retailer will not have to keep copies of them. Restricting the issue of such invoices to supplies of a value not exceeding £10 limits the risks involved in any departure from that full invoicing requirements.

Mr. David Mitchell: In view of what my hon. Friend said, although not in view of the satisfactory nature of his reply, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 40

APPEALS

11.45 p.m.

Mr. Higgins: I beg to move Amendment, No. 114, in page 29, line 29, leave out subsection (2) and insert:
'(2) An appeal under this section shall not be entertained unless the appellant has made all the returns which he was required to make under section 30(2) of this Act and has paid the amounts shown in those returns as payable by him.
(3) Where the appeal is against a decision with respect to any of the matters mentioned in paragraph (b) or (c) of subsection (1) of this section it shall not be entertained unless—
(a) the amount which the Commissioners have determined to be payable as tax has been paid or deposited with them; or
(b) on being satisfied that the appellant would otherwise suffer hardship the Commissioners agree or the value-added tax tribunal decides that it should be entertained notwithstanding that that amount has not been so paid or deposited.
(4) Where on an appeal under this section it is found—
(a) that the whole or part of any amount paid or deposited in pursuance of subsection (3) of this section is not due; or
(b) that the whole or part of any amount due to the appellant under section 3(2) of this Act has not been paid;

so much of that amount as is found not to be due or not to have been paid shall be repaid (or, as the case may be, paid) with interest at such rate as the value-added tax tribunal may determine; and where the appeal has been entertained notwithstanding that an amount determined by the Commissioners to be payable as tax has not been paid or deposited and it is found on the appeal that that amount is due the tribunal may, if it thinks fit, direct that that amount shall be paid with interest at such rate as may be specified in the direction'.
We have given great care and attention to the enforcement provisions and have thought to take into account in our deliberations the representations which have been made to us in many quarters, and, indeed, particularly in Committee upstairs.
This Amendment, which is concerned with the deposit of tax, is in response to the representations made particularly in Committee. I do not wish to detain the House for long, but I should stress that the Amendment is important and a radical departure from the position when the Bill went into Committee and as it now stands.
The particular points which impressed my hon. Friends and myself in Committee upstairs were made by my hon. Friends the Members for Basingstoke (Mr. David Mitchell) and Dartford (Mr. Trew) and others on the effect that the operation of the Clause, if unamended, might have on those who would suffer hardship as a result of having to pay the tax because it had an adverse effect on their cash flow. Indeed, it was suggested that in certain circumstances someone called


upon to pay the deposit of the tax might be put out of business and thereby suffer hardship. We were anxious to meet this point about hardship, but there are other subsidiary points to which I shall turn later. I think on this occasion the House would probably wish me to outline rapidly exactly what the Amendment does.
The Amendment alters and limits the existing pre-condition of prior deposit of tax as assessed by the Commissioners before an appeal can be entertained by a VAT tribunal.
First, it provides explicitly that no appeal will be entertained unless the appellant is up to date with his tax returns and has paid the tax declared in those returns. I think that is reasonable.
Secondly, however, it restricts the existing requirement of deposit of disputed tax to cases falling within Clause 40(1)(b) and (c) only—that is, appeals against assessments and against liability or valuation decisions.
Thirdly, it makes provision for the deposit of disputed tax to be waived even in these cases if either the Commissioners or the tribunal accept that the appellant would otherwise suffer hardship.
The point I am making is two-fold. First, whereas in subsection (1) there is a long list of (a), (b), and so on, right down the line, it will now apply within the terms of the Amendment in the case of only subsection (l)(b) and (c). There is a minor point on subsection (3) with which I do not think I need weary the House now.
Secondly, if hardship can be shown, it may be considered by the Commissioners who,
if they feel there is hardship, can waive it, and that is the end of the matter. If they decide not to waive it on grounds of hardship there will be a right of appeal to the tribunal.
As a corollary to that, the Amendment alters the existing provisions on interest by giving the tribunal discretion to direct that in cases where deposit of tax in dispute has been waived, but the disputed tax found to be due, it should be paid with interest, and this again is reasonable. The existing provision that tax paid or deposited but found not to be due should be repaid with interest is also amplified to make it clear that similar treatment will be given to refunds of tax which have been withheld pending

appeal and which are found on appeal to be justified. The Amendment is the outcome of the consideration which we have given to the matter since it was raised in Committee.
The Committee recognised that deterrents against frivolous appeals were necessary, but there was considerable support for the view that we should avoid hardship, and the Amendment effectively strikes a balance between those two considerations. It removes the deposit requirement altogether in a number of cases, and for others there is this appeal provision. We believe that it will provide protection against a flood of unjustified appeals, launched solely to postpone payment of tax, which would seriously overload the new tribunal organisation, slow down the collection of tax and also slow down the rate at which decisions are made by the tribunals. The purpose of these tribunals is to give speedy decisions. This was the point which we explained in Committee we were particularly anxious to cover, and we believe that the Clause will be an important help in that regard.
I do not think that the House would wish me to go over the precedents of Inland Revenue provisions or purchase tax legislation, but if I might detain the House for a few moments more I want to cover an important point made by my hon. Friend the Member for Horsham (Mr. Hordern). It is what I think one might call the "thin end of the wedge" point. My hon. Friend felt that if we were to take to the power which we are proposing to take in this Clause, even with the provisions covered in the Amendment, it might be the thin end of the wedge in Inland Revenue cases. He expressed concern that this might be the position. This arises, in part, from the fact that I emphasised the extent to which there were delays in Inland Revenue cases and how we were anxious to avoid a similar situation with VAT.
During the Committee debate on subsection (2) my hon. Friend the Member for Horsham expressed those fears and foresaw that a later Government might say that the VAT tribunals are not very different from the panels of General Commissioners who form the appellate bodies for income tax, corporation tax and capital gains tax. If, my hon. Friend suggested, a later Government saw some


degree of similarity—which he did not think was inconceivable—they might be prompted to legislate to require that a person who appeals against say, an income tax assessment should be required to deposit the whole of the tax charged in the assessment before his appeal became valid. At present he need pay at this point only the tax not in dispute.
I give my hon. Friend and any other hon. Member who have similar apprehensions an assurance that this Government will not introduce legislation in this sense, and I do not believe that any later Government would reach the conclusion that it would be reasonable to take this course to solve the problem which undoubtedly arises in the administration of income tax and other appeals of the kind that I have mentioned.
As I said in Committee, there are more than 750,000 appeals listed for hearing each year before the General Commissioners, and of these all but a handful arise from delay. But whatever is the right solution to this problem, it cannot be the same as that set out in subsection (2) which I am asking the House to amend. The taxes with which the General Commissioners deal are annual taxes, and although it is not always possible to attain it, the aim must be to clear each year's tax before the next year's tax is due. VAT is payable quarterly, and if we did not take the course in subsection (2) succeeding sums would become due before the appeal was settled, and by this means a considerable sum could accumulate.
I thought it right to give that assurance to my hon. Friend and others who have expressed fears about the relationship between the indirect and direct tax systems and the position of Customs and Excise and the Inland Revenue. I am sure that the Amendment will commend itself to the House.

Mr. Joel Barnett: The Financial Secretary knows that we are far from happy with the whole of these enforcement provisions and appeals, but this Amendment is an improvement. For that reason we are happy to accept it. If we had time I might have wanted to pursue a little further the point he was making about "the thin end of the wedge" argument on the question of appeals to the Com-

missioners on income tax and corporation tax, because it is my experience that the vast majority of those are simply appeals against estimated assessments and they are estimated assessments raised simply because the accounts had not been submitted and are largely meaningless.

Mr. Hordern: Many minds will be set at rest by the assurances my hon. Friend has given and I am grateful for them.

Mr. Ian Percival: The Clause will be much better when amended as proposed. My sole purpose in speaking is to place two matters on record. The first is that I do not think that we have got the balance quite right. Practically all the relevant cases are covered by paragraphs (b) and (c). In those cases all the tax, even that in dispute, has to be paid as a condition of proceeding with the appeal although there is now a procedure under which the amount may be remitted. We should get nearer to what I regard as the right principle, if we did it slightly the other way round and said that only the tax not in issue has to be paid, but giving power, either to the Commissioners, subject to the right of appeal to the tribunal, or to the tribunal, to say that in particular cases even the tax in dispute should be paid—in other words, giving a power to impose conditions rather than making those conditions apply by law. These are matters which I will go on discussing with my hon. and right hon. Friends during the year before any of this comes into operation.
The second point is that I am glad that my hon. Friend has made it perfectly clear that this is not to be a precedent. One of the arguments used against altering this Clause has been that there is a respectable precedent for it in the Purchase Tax Act. I am glad that my hon. Friends have departed from that and have not insisted that it is a precedent which should be followed, and have been willing to change.
I want to put on record my views about this point because we are doing something which is a departure from past precedent, which affects anything from 1 million to 2 million people. That might easily be quoted as a precedent. In this case this is something that is being done after full debate in the House


and the country, whereas the similar provision in the Purchase Tax Act was introduced, I think, during the war and probably without anyone noticing it. Certainly I do not think it was noticed in the legal profession.
I am glad to hear my hon. Friend place it on record that this is not intended to be a precedent. Subject to those two comments, I welcome this Amendment, which represents a substantial shift from the original position. It is one for which we should be grateful.

Mr. Peter Trew: As one of those who in Committee referred to the question of hardship I am grateful to my hon. Friend for the lengths to which he has gone to meet the case. If in practice he finds that tribunals become overloaded, I hope that he will not relent on the hardships provisions but will increase the number of tribunals.

Amendment agreed to.

Schedule 6

CONSITUTION AND PROCEDURE OF VALUE ADDED TAX TRIBUNALS

12 midnight.

Mr. Higgins: I beg to move Amendment No. 115, in page 115, line 47, at end insert:
(5) If a person ceases to be President of Value Added Tax Tribunals and it appears to the Treasury that there are special circumstances which make it right that he should receive compensation and the Minister for the Civil Service approves, there may be paid to that person a sum of such amount as the Treasury may, with the approval of that Minister, determine.
It will save time if with this Amendment we take Government Amendments Nos. 116 to 118.
I believe that the House will not wish to me to go into details on the Amendments. The effect of Amendment No. 115 is to enable compensation to be paid to a president of value added tax tribunals who ceases to hold office as such.
Amendments Nos. 116 and 117 are minor technical drafting Amendments the effect of which will be to leave open the question which Department will pay a pension to or in respect of the widow of a former full-time chairman of value

added tax tribunals instead of its being specified that the payment shall be made by the Treasury. These Amendments are not proposed merely for stylistic consistency with related Clauses which do not specify a Department but because it is expedient that the paying Department should not be specified in the Statute, as such arrangements are altered from time to time for technical reasons.
The effect of Amendment No. 118 is to enable compensation to be paid to a full-time chairman of value added tax tribunals who ceases to hold office as such.

Amendment agreed to.

Amendments made: No. 116, in page 116, line 36, leave out 'the Treasury may pay' and insert 'there may be paid'.

No. 117, in line 38, leave out 'they and insert 'the Treasury'.

No. 118, in line 28, at end insert:
(5) If a person ceases to be a full-time chairman of value-added tax tribunals and it appears to the Treasury that there are special circumstances which make it right that he should receive compensation and the Minister for the Civil Service approves, there may be paid ot that person a sum of such amount as the Treasury may, with the approval of that Minister, determine.—[Mr. Trew.]

Clause 42

ADJUSTMENT OF CONTRACTS ON CHANGES IN TAX

Mr. Trew: I beg to move Amendment No. 202, in page 31, line 3, after 'supplied' insert:
'or where a contract for the letting of goods on hire is entered into and during the period of hire,'.
The intention of this technical Amendment is to extend that scope of the Clause to include contracts for hiring. As drafted, the Clause appears to include only contracts for the supply of goods or services. The words which appear to cause difficulty for contracts for hiring are in line 2—
before the goods…are supplied".
In the case of a contract for hire the goods are supplied at the beginning of the hire period and where such contracts are in existence at 1st April, 1973, when VAT comes into being, or at any time


when there is a change in the tax, it would seem that the hirer will not be able to invoke the Clause and thereby raise his hire charge to recover the increase in tax, because the goods will already have been supplied. If the Clause is read in conjunction with Clause 7, it could be that the difficulty is dealt with. For the benefit of those who will have to construe the Clause, my hon. Friend should make this clear.

Mr. Nott: My hon. Friend is concerned about whether the Clause covers hirings. Clause 5(2) states:
Supply of goods includes…in particular, the letting of goods on hire…
Clause 7 is relevant. If there is a tax change in the course of the hiring, some of the supplies will attract tax at the old rate and some at the new, and the Clause as it stands will operate on the supplies taking place after the change. If in any case there is only one supply for a hiring, it will occur either after or before the tax change, and the Clause as it stands will operate or not as the case may be.
Therefore, the Clause as we debated it in Committee will apply in the case of a contract entered into before the coming into operation of VAT. In the case of hiring where payments are made over a period, it might in certain circumstances be necessary to deal with the first payments which come into effect before a tax change in one way and payments which come into effect after a tax change in another.

Mr. Peter Rees: I remain as unclear after that exposition as I was before. Let us suppose that a person enters into a contract of hire and that during the course of a contract there is a change in the rate of tax. This is on normal contractual principles. Unless there is an amendment in the sense to which my hon. Friend refers, the hirer will be unable to amend his contract charges. This is very simple, and I take the first point made by my hon. Friend that supply is defined in subsection (5) or (6) of Clause 7 as including a contract of hire.
What is not made clear is at what point during the contract of hire supply takes place. As I read the Bill, the supply must take place when the contract of hire

is entered into and, say, the television set is made available to the person to whom it is hired. That is a situation which the Bill does not appear to cover.
Let us say that a contract of hire is entered into on 1st April, 1973 and the television set is delivered to one of my constituents. There we have the supply, because the contract of hire is deemed to include supply. Then let us suppose that on 7th April of that same year the Budget alters the rate of value added tax. It is not clear from my reading of the Bill that there is a fresh supply every week that the hirer pays hire charges, and therefore that the person who leases out the television set is entitled to amend the contract. I may be obtuse but, frankly, to me the point still remains obscure. I hope that my hon. Friend the Minister of State can clear it up.

Mr. Nott: This is a very complicated matter, and we debated it at some length in Standing Committee. Let us assume that in the instance of the television set two or three payments are made before the tax is raised. In that case, the payments will have been tax inclusive of the old rate of tax. However, if the rate of tax is then raised, Clause 42 then comes into effect and will apply to subsequent payments. The new tax rate will exist.
I think that my hon. and learned Friend the Member for Dover (Mr. Peter Rees) is confused because by regulations there will be a succession of supplies. Perhaps if I had said that at the beginning the position would have been made clearer more immediately. Regulations will define the matter as being a succession of supplies rather than a single supply.

Mr. Rees: I am most grateful to my hon. Friend the Minister of State. The point has now emerged that by regulations each, as it were, payment shall be regarded as marking a succession of supplies, and that would be entirely covered by the Clause. But I am sure that my hon. Friend will concede that in the Bill as drafted that point is not covered. I quite accept what he says on the basis that there will be regulations, and I apologise for taking up the time of the House.

Mr. Trew: Just so as to make the matter quite clear, I understand that the regulations to which my hon. Friend the


Minister of State refers are covered by Clause 7(4). I see that my hon. Friend agrees, and in view of his explanation I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Edward du Cann: I beg to move Amendment No. 210, in page 31, line 9
and references to a contract for the supply of goods or services include reference to a trust imposing on any party thereto the obligation to supply goods or services".
The questions I wish to raise with my hon. Friend are in some respects analagous to those so clearly deployed on the last Amendment. They relate to the effect of Clause 42 on authorised unit trusts.
I shall be brief, in deference to the obvious wishes of the House, but I cannot refrain from saying that it is increasingly the case that the method by which we deal with these matters on Report is unsatisfactory. It may be convenient for the Minsters—I am sure that it is—but it is not satisfactory from the point of view of wise debate, of control of the executive and of democracy.
This is a matter which affects a large number of people, certainly in excess of 2 million and perhaps 3 million. It certainly affects not less than 250 authorised unit trust schemes, that is to say unit trust schemes the investments, units or shares in which can be freely sold to the general public.
I have an indirect interest to declare, but no longer a direct interest. That is a matter of history.
The main purpose of Clause 42 is to allow the parties to a fixed price contract to adjust the price by the amount of any tax introduced after the date of the contract. The underlying principle of adjustment of contracts on changes in tax (that is what the short description of the Clause says) is accepted. I have no wish to quarrel with that. It clearly should embrace the services supplied by the managers of an authorised unit trust scheme under the trust deed.
Such a supply is necessarily at a fixed price in accordance with the terms of the trust deed by which the unit trust is constituted. The price could only be increased by statute or by the authority of all the investors under the trust in general meeting.
The question is simply, what does the proposed Statute say? In relation to unit trusts, an the view of those who have responsibility as trustees or managers of a unit trust, the words of Clause 42 may be regarded as unclear in three respects.
It is not clear whether the references to a "contract" in line 1 and line 4 include references to an authorised unit trust. The concept of a unit trust is quite distinct, historically and currently, from that of a contract. The managers owe obligations to the trustee and the investors, the unit holders, as beneficiaries of the trust. Individual unit trust managers and the Association of Unit Trust Managers have been clearly advised in the past that the nature of the managers' obligations is that of a quasi-trustee.
My first question is whether or not this reference to a contract includes reference to a unit trust? If my hon. Friend says that that is so, I shall have nothing further to say on that point, but the Bill as drafted is not clear.
The second matter of lack of clarity is this: it is true that on a purchase, the moment an investment is made, the practice is for a contract note to be issued to the investor. However, this merely obliges the managers to issue a specific number of units at a specified price. It is not clear from the wording that it would be creating a continuing contractual relationship between the managers and the unit holders.
If my hon. Friend advises me that such a continuing contractural relationship is created, my point of anxiety disappears.
The other matter about which concern has been expressed is this: In the Bill the relevant tax change must occur after the making of a contract. It is unclear whether the relevant time is the date of purchase of units by a unit holder or the date of execution of the trust deed—which is the date on which the authorised scheme was established. Logically, I suppose that one should argue and take the view that the only relevant moment is the date of the trust deed, as it is at this point that the amount of the annual charges is crystalised, and again, as right hon. and hon. Members will know, it is in that document that the quantum of charges is expressed and agreed to. However,


whatever the logic may appear to be, it is at least arguable that a new contract is created whenever a unit sale is made. That is the third point which seems unclear and about which I should be grateful for assurance from my hon. Friend.
12.15 a.m.
If those with whom I have been associated in the past in this industry, and whom I know so very well, and I all take the view that the Clause as drafted is unclear in these three respects, it is in order to remove these three ambiguities and to eliminate the need for unit holder meetings to be held by every authorised unit trust in the United Kingdom—more than 200 of them—that these changes and clarifications are proposed.
I have long been of the view—I am sure the whole House would agree with it—that good law is clear law. My hon. Friend has heard the points of anxiety. I assure him that these views are genuinely held. They are by no means carelessly expressed. If my hon. Friend feels them to be justified in any respect, I hope that he will view and accept the Amendment as rendering the law clearer than it appears at present. If, on the other hand, he can advise me that the anxieties of which I have spoken are misplaced and that there is no need for anxiety of any sort, I should be only too happy to ask the House to give me leave to withdraw the Amendment.

Mr. Nott: Although the House is anxious to make progress, I can tell my right hon. Friend that I am quite happy to debate this matter at considerable length if he would wish to do so. He seemed to be implying that we wanted to pass quickly over the Amendment. But we certainly want to deal with it thoroughly. I am referring to my right hon. Friend's opening remarks about the way in which the Report stage was being conducted.
As my right hon. Friend said, the arrangements under which a unit trust operates involve the creation of a trust by the manager of the fund in favour of an independent trustee who holds the assets of the funds on trust for the unit holders. The manager's remuneration is a charge of the assets as required by the deed. As this matter has been raised in

representations to us, we have examined what we are assured is a typical trust deed and have reached the conclusion that besides establishing the trust the deed also expresses a contract between the manager and the trustee for the supply by the former to the latter of the service of investment management and certain administrative services, the consideration being the charge on the assets. We therefore see no reason to doubt that Clause 42 applies in this case and we have informed the Association of Unit Trust Managers that that is our view.
Summarising this matter and answering in a rather more crisp way my right hon. Friend's three points, first, we believe that the kind of trust deed which is entered into here constitutes a contract for the purpose of Clause 42; second, that a continual relationship is created; and third, that the execution of the trust deed is the point where the matter commences.
I hope that I have covered my right hon. Friend's anxieties and that he will consider that answer sufficient for his purposes and feel free to withdraw his Amendment.

Mr. du Cann: My hon. Friend has been typically clear and typically courteous. First, may I add a word on the question of this Report stage. I make no complaint of the conduct of my right hon. and hon. Friends. As always, they do their work extraordinarily well, and with great regard to the wishes and anxieties of the House. I complain of something different, that is, the way in which this and other Finance Bills are presented to the House. I feel that the House as a whole ought to consider this matter for future. I think that what we do suits the Executive very well, but I am not at all sure that debates at this time of night and the taking of so many matters on Report in this way is the best way to go about our business.
On the issues which I presented by the Amendment, I repeat what I said at the outset. My hon. Friend has been typically clear and courteous. He has exactly answered the points of anxiety which I had in mind. In view of his clear assurances, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 45

MEANING OF "BUSINESS", ETC.

Mr. Sheldon: I beg to move Amendment No. 120, in page 32, line 5, leave out paragraph (b).

Mr. Deputy Speaker (Mr. E. L. Mallalieu): I suggest that it will be for the convenience of the House to consider at the same time the following Amendments:

No. 73, in Schedule 4, page 112, line 34, at end insert:

'GROUP 14—SPORTS CLUBS

Item No.

1. Subscriptions to sports clubs by members actively participating in a sport'.

No. 78, in Schedule 4, page 112, line 34, at end insert:

'GROUP 14—CLUBS

Item No.

1. Subscription to private clubs'.

No. 79, in Schedule 4, page 112, line 34, at end insert:

'GROUP 14—LEARNED SOCIETIES

Item No.

1. Subscriptions to learned societies'.

No. 121, in Clause 45, page 32, line 5, after 'association', insert:
'other than a learned society'.

No. 122, in page 32, line 7, after 'members', insert:
'but not normal membership subscriptions'.
and No. 123, in page 32, line 8, leave out paragraph (c).

Mr. Sheldon: The main purpose of this group of Amendments concerns clubs and societies. There has been considerable anxiety about the position of clubs in relation to value added tax because the activities of clubs cover so wide a range. There are many clubs akin to certain societies. There are within this wide range clubs which one would wish to encourage, and there are others towards which one would wish to be neutral.
The difficulty with the value added tax is that, whereas the Government praise its comprehensiveness, it does not seem able to discriminate where certain discriminations might prove necessary. As a result, all clubs will find themselves liable to the tax. We wish to consider the matter further. However, at this

stage in our proceedings, and in view of the lateness of the House, I shall direct attention, in particular, to the position of the learned societies.
I have seen a list of about 600 of these societies and institutions, ranging from the Institute of Chartered Accountants, which may not have all our sympathy, to the Royal Zoological Society of Scotland, which will certainly have our sympathy, and especially that of my hon. Friend the Member for West Lothian (Mr. Dalyell). I mention those two merely because they were the first and the last in the list which I happened to turn up.
The list includes some of the most venerable and some of the most important of our national institutions, of which we are rightly proud. What is more, they reflect a great many of the strengths of our society. It has been said that three people in Britain constitute a committee. What we often forget is the valuable work which is undertaken by many of these societies in which there is no reward for any of the people con-concerned save the pleasure of giving of their time and their service in advancing their own vocation or branch of learning.
A few names from the roll-call make the point clear: the Royal Institute of British Architects, the Institution of Civil Engineers, the Institution of Mechanical Engineers, the Chemical Society, the Royal Institute of Chemistry, even the Cyclists Touring Club, even the Fabian Society, and possibly the Bow Group, too, though I am not sure that its finances would bring it within this category, since it probably has a turnover of rather less than £5,000. I do not know. Next, the Institute of Health Education, the Institute of Industrial Safety Officers, the Town and Country Planning Association, the Institute of Works Managers.
Those are just a few of the important bodies which contribute enormously to the understanding of industrial processes and branches of academic learning which have so much to contribute to our community.
One feature common to all these societies is that the spread of knowledge is one of the primary purposes of their work. The richness of our society is one of our great strengths. It is not always easy to help this kind of institution. They have an independence which


it is right they should have. They certainly do not need particular kinds of subsidies which might be difficult to devise. But on the other hand they certainly should not be taxed. I should have thought that the Chief Secretary would want to go to great lengths to ensure that they will not suffer from this burden.
In Clause 42 we know that the trade unions are specifically excluded. In the Committee debate we were told that
Contributions to political parties are regarded as being outside the scope of the tax…on the ground that they are akin to donations."—[Official Report, Standing Committee E, 14th June, 1972; c. 971.]
I do not know whether contributions to learned societies are regarded in the same way. If they are I do not know why the Minister who wound up that debate did not accept the Amendment: but I do not wish to argue that point at length.
If it is possible to have in the Bill the specific exclusion of trade unions, it is surely possible to have a similar exclusion for the learned societies. If that is not considered possible at this late stage, will the Chief Secretary agree to regard subscriptions to learned societies in the same way as subscriptions to political parties, as "akin to donations"? However much of a grammatical nonsense that may be, I am prepared to accept an explanation like that. What is important is the need for clarification here and the need for every kind of assistance to be given to these important bodies.

Mr. Dalyell: Does my hon. Friend know the risk he is taking by raising the subject of the Royal Zoological Society of Scotland? It might provoke me into certain dissertations on orangutangs. Mr. Speaker has kindly given his orangutang to Edinburgh Zoo and that makes two there. They are well satisfied with life at the moment.
However, I have more germane subjects to raise. There are many societies which are marginal in this respect and it seems that £5,000 is the critical figure. I have a letter written by Mr. E. J. Hoskin, of H.M. Customs and Excise, King's Beam House, London, E.C.3, to the Parliamentary and Scientific Committee. He says:
So far as subscriptions are concerned, it is my view that the Committee would be

deemed to be carrying on a business for the purposes of VAT by reason of clause 45 of the Finance Bill, and accordingly membership subscriptions would in principle be chargeable with tax. However, the Chancellor has proposed a general exemption from the tax for those with a turnover in taxable goods and services not exceeding £5,000 a year and, from the accounts which you were good enough to supply it seems that The Parliamentary and Scientific Committee will enjoy the benefit of this exemption.
The only point I make is that there is a balance here. It might be that the Parliamentary and Scientific Committee accounts are just under this magical figure of £5,000. There will be
those which are just above it which will be substantially hit and those below which will get away. Is there not a case for some kind of tapering?

12.30 a.m.

Mr. Patrick Jenkin: I will respond to the Amendment in the same spirit as that in which the hon. Member for Ashton-under-Lyne (Mr. Sheldon) moved it, dealing briefly with the general case about clubs, next saying something about learned societies, and then coming to the point that the hon. Member for West Lothian (Mr. Dalyell) has made.
The argument about clubs generally, and particularly some clubs in the North of England and some of the clubs not far from here, is that they represent substantial elements of personal consumption. It was the view of my right hon. Friend the Chancellor that in a general comprehensive tax on consumption there was no reason for them to escape. As we have said repeatedly, we do not try to draw distinctions between one form of spending and another, except the broad categories for zero-rating and so on, least of all to draw distinctions of the sort the hon. Gentleman was urging upon us, which would lead us to say that some clubs were more worthy of support than others and that we should try to discriminate. It would be impossibly difficult for any Government.
Our general view is that subscriptions to clubs represent a form of consideration for the supply of services which are represented by the facilities the club makes available to iths members. This is always subject to the £5,000-a-year limit. The facilities which the club provides, such as the meals in its dining room, or, in the case of some societies, literature or other


goods or services, will be within the charge to tax in any event under the normal rules of the VAT that we have already discussed. What come in under the Clause are the subscriptions. I should make it clear that it is to the aggregate of the subscriptions and the other trading turnover that the £5,000 limit applies.
Learned societies are in a different case under the Bill for sporting and social, recreational clubs. They come under subsection (l)(c). They have an option under subsection (2) to remain an exempt body if they wish. The reason is perfectly clear. They will have a certain amount of hidden tax, and if they are exempt there is no way in which that tax may be rolled forward into the accounts of its members, who may themselves be taxable traders. One example is a professional society which in the course of its operation incurs hidden tax, and all of whose members are registered traders. For example, the great majority of members of the Institute of Chartered Accountants may be registered as individuals, as partners in a firm. The members of the society might well decide to take advantage of the election to opt in, so that the subscriptions were then chargeable to VAT and would be treated as an input tax in the accounts of their profession. But there may be societies the great bulk of whose members are not taxable traders. In those circumstances they would prefer to opt for exemption, because there would be no point in charging the tax, as it could not be treated as an input tax in their members' own activities.
That is the difference. In the ordinary club, the social, sporting club, the subscriptions will be chargeable, together with the turnover, if the total is more than £5,000. The learned societies have an option. In either case the member is getting special facilities in return for his subscription. This is a form of consumption and, subject to the points I have made, it is right that clubs should be within the charge of VAT.
I understand the point made by the hon. Member for West Lothian. The £5,000 limit in a sense is arbitrary. We felt that the figure was at about the right level to distinguish between the small trader, the small club, the small professional man and somebody in a larger way

of business who should come within the charge to the tax, but it is, of course, a single cut-off point. It would be exceedingly difficult and add greatly to the complexity of the tax if we were to introduce any form of taper. It would be difficult to apply it to a single body like the Parliamentary and Scientific Committee, of which many of us are members, and not to others. There comes a point when a society or club becomes big enough for it to be right to apply the tax. A learned society would be within paragraph (c) and so have the right of election. I imagine that virtually none of the members of the Parliamentary and Scientific Committees are taxable traders and they therefore would not be able to set off the tax. It would be inconceivable in those circumstances for that Committee ever to opt to be within the tax so as to charge VAT on its subscription.

Mr. Dalyell: In candour I have to take the point about the administrative difficulty of tapering. Is £5,000 the right figure? Would it not be more sensible, given present-day costs, to have £10,000 or £15,000?

Mr. Jenkin: As my right hon. Friend said in his Budget statement, £5,000 is substantially higher than the exemption limit that has been fixed in any of the Common Market countries, where the highest figure—and I speak from memory—is equivalent to about £1,300, roughly one-third of our level. We have pitched it a good deal higher and have taken out a wider spectrum of small business men, small professional men and small clubs. Generally, this has been welcomed. I entirely accept that it is an arbitrary figure and one which as the years go by any Government will want to keep under review.

Mr. Sheldon: With the leave of the House. The Chief Secretary has not met my point. I understand fully that where most members of a learned society are traders it can help if VAT is charged and the input is allowed by the member firms of the society. The list I gave included a large majority of societies consisting of individual members, and it is they I am particularly interested in. What for example, does a member of the Institution of Civil Engineers get in the way


of benefit from being a member? The amount of encouragement to those people will be small, whereas the amount of discouragement may be large. I was hoping that the Chief Secretary would be able to give assistance to this category.

Mr. Jenkin: At this late hour I cannot add much to what I have said. I should have thought that the Institution of Civil Engineers is a body from which members derive considerable advantage. I do not know if the hon. Gentleman has ever been into its premises in Great George Street. There is a substantial library and I have no doubt the Institution provides all sorts of technical services for its members. The Institution clearly comes under paragraph (c) is being an organisation of persons carrying on a profession, and so it has the power to elect whether it should be within or outside the tax.

Amendment negatived.

Clause 47

COMMENCEMENT

Mr. Higgins: I beg to move Amendment No. 126, in page 33, line 19, leave out' or invoice issued'.

Mr. Deputy Speaker (Miss Harvie Anderson): With this Amendment we are to take Amendment No. 127.

Mr. Higgins: These Amendments are consequential on the Government Amendments to Clause 7, on the tax point. The words proposed to be deleted are now superfluous, since the Clause 7 Amendments make ordinary invoices no longer relevant for determining the time of a supply, and tax invoices—that is, invoices showing tax—cannot be issued before 1st April, 1973, when the tax begins.
These are the last Amendments to the VAT Clauses, although there are some purchase tax Clauses to come. I therefore move them with considerable enthusiasm.

Amendment agreed to.

Further Amendment made: No. 127, in page 33, line 24, leave out 'or issued'.—[Mr. Higgins.]

Schedule 7

CAR TAX

Mr. Nott: I beg to move Amendment No. 131, in page 119, line 42, leave out sub-paragraph (1) and insert:
'(1) Regulations under this Schedule may make provision for enabling the Commissioners to remit the tax on a chargeable vehicle, subject to such conditions as they think necessary for the protection of the revenue, where the vehicle has been used and owned outside the United Kingdom for not less than such period as may be prescribed by the regulations and such other conditions are satisfied as may be so prescribed; and the conditions that may be imposed in pursuance of the regulations may include conditions prohibiting or restricting the disposal of the vehicle for such period as may be so prescribed'.
The object of the Amendment is to provide an enabling power under which regulations may be made laying down the conditions for the remission of car tax on cars imported by a person on a change of residence.
The purpose of having this enabling power is to make it possible for the provisions relating to car tax to be readily kept in line with the corresponding conditions for import duty and VAT.
I hope that that will be an adequate explanation for the House.

Amendment agreed to.

Clause 53

ABOLITION OF PURCHASE TAX

Mr. Geoffrey Finsberg: I beg to move Amendment No. 221, in page 37, line 14, leave out "1st October 1972" and insert "31st March 1973".
I must declare an interest as Chairman of the all-party Retail Parliamentary Group and a member of the executive of the Multiple Shops Federation. I regret that the hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) is now absent, because he would otherwise have been supporting me on this Amendment as my Vice-Chairman.
I believe that as the Bill is now drafted there is a danger of double taxation being imposed by the disappearance of purchase tax and the imposition of VAT. There is still considerable anxiety in the retail trade about this.
The Retail Consortium is made up of the Multiple Shops Federation, the Co-operative Union, and several allied bodies representing all retail interests in this country. They are worried. For several years sale-or-return schemes have been in operation for purchase tax. These have been approved locally by the Customs and Excise authorities and have been working extremely well. Now, at the last gasp of purchase tax, there is a sudden change of view on the part of Customs and Excise.
12.45 a.m.
I should like to read an extract from a letter dated 8th June from the Commissioner of Customs and Excise to the Secretary of the Retail Consortium. It says:
…if a sale or return arrangement is to succeed in deferring the tax point until the goods concerned are purchased by the retailer, it must at all times be possible for any of the articles so purchased from the registered supplier to be identified to the supplier's delivery document by means of adequate records kept by the retailer…this conclusion is not dependent on any new legal provisions but is implicit in the existing law. The purpose of the new regulations is merely to codify the requirements and place certain statutory obligations on retailers to keep and preserve the necessary records.
Here comes the rub:
Whilst it may be the case that certain sale or return schemes which have hitherto been accepted do not strictly comply, I am afraid that in the light of the regulations envisaged by Clause 53 (7) of the Finance Bill we have no option but to require, at any rate from 1st October, 1972, that such schemes are modified to take full account of the law if they are to continue to succeed in deferring tax liability.
Surely my hon. Friend the Financial Secretary can see how difficult this must make things for the trade. It has for years in various parts of the country had acceptable sale or return schemes—there is no argument about that—and yet, just at the conclusion of purchase tax, the Customs and Excise says that in the light of regulations envisaged the schemes already in existence, which have benefited traders throughout the country for years, may have to be modified. I suggest that this is not as helpful as it might have been.
My hon. Friend has made certain very welcome concessions, for example on television rentals. I should like him to consider the case of mail order. I am refer-

ring not to the squares in newspapers but to the large general catalogue mail order companies trading in the United Kingdom—the Mail Order Traders Association, all thoroughly reputable. They have been in touch with the Customs and Excise for the past 15 months. It must be appreciated that the particular problem of these companies is that their catalogues, running into nearly 1,000 pages, have to be printed and distributed and goods priced several months—not weeks—before 1st April, 1973.
The mail order companies raise the following points: first, the length of the tax pause; secondly, how much prior notice will be given of the length of the tax-free period as it is necessary in the case of mail order, because of its forward planning, that prior notice should be as possible.
They then ask, however, if concessions are to be given in respect of television rental charges to avoid the unfairness of double taxation, whether the same principle, apparently accepted by the Treasury, cannot be applied to goods sold on sale or return or credit prior to VAT day which have borne purchase tax but which are still being paid for on extended credit terms after 1st April, 1973, and which as far as I can see will in turn attract VAT. For goods sold on 20 or 38 weeks' credit in the major mail order catalogues prior to 1st April, 1973, what will be the position concerning the balance of the payments at the end of that period?
Having said that, I want to say only two more things briefly. First, there is the question of the tax pause in general. If it is too long, it will presumably cause price-cutting and deferment of order. If it is too short, it will not permit stocks to be disposed of without loss. I remind my hon. Friend that both when SET was halved and when purchase tax was reduced most of the major reputable retailers—the Co-operative movement, Marks and Spencer and the like—made reductions and passed them on.
Therefore I urge that the existing arrangements should continue until the end of purchase tax, since they have been approved previously, and I hope that my hon. Friend the Financial Secretary will agree that the principle of double taxation is one which is utterly repugnant to this House.
In the light of what I have said, necessarily briefly, I hope that my hon. Friend will find it possible to accept the Amendment.

Mr. Higgins: Several of the issues raised by my hon. Friend the Member for Hampstead (Mr. Geoffrey Finsberg) were raised on an earlier Amendment, when I said that there were some points which I should have to return to at this later stage. However, I think that the two Amendments should be read in conjunction.
My hon. Friend's points are concerned essentially with the transitional arrangements in the period when we are changing over from SET and purchase tax to VAT. As I said when we discussed the earlier Amendment, there is no perfect solution to the problem of tax-paid stocks at the changeover to VAT. Any stock taking scheme would be impracticable for Customs and Excise, and it would present tremendous difficulties for retailers if they were to attempt to calculate the tax element in their stocks at any given date. Similar objections apply to variations which have been suggested, such as those proposed in Committee by the hon. Member for Heywood and Royton (Mr. Joel Barnett).
What is required is a simple solution which will give a broad measure of relief to help facilitate the changeover. It is not some dogmatic view on whether double taxation per se is to be avoided at all costs, but, rather, an attempt to avoid disruption in the changeover. That is what we are seeking to do.
The Government's proposals for dealing with the problem are outlined in paragraph 27(a) of the White Paper. In brief, they divide the field into two sectors: on the one hand the classes of goods for which sale or return arrangements are generally suitable and for which no transitional period relief is provided: and on the other hand the remainder of the field for which the transitional period relief is envisaged.
It was on the earlier Amendment that we dealt at some length with the transitional period, its length, and so on. We discussed whether there were disadvantages if it were too long or other disadvantages if it were too short. It is important to hit a balance. We aim to

to provide a period within which stocks of purchase tax paid goods can be run down and stocks of VAT paid goods can be built up.
I do not think that the House will wish me to go over areas that we have covered before. However, my hon. Friend the Member for Hampstead raised some other questions about the position where there are sale or return arrangements. He referred to a letter. There has been some correspondence between Customs and Excise and the Retail Consortium and others on this problem, and I have discussed it with various interests in the trade. Discussions have been held to try to find the best solution that we can. However, there are limits to how far we can go.
For the classes of goods listed in paragraph 27(a) of the White Paper as being suitable for sale or return arrangements and for which no tax-free transitional period is to be provided, all existing SOR schemes will be left undisturbed. In general, but with the important exception of gramophone records and tapes, these are goods which are readily identifiable, and no difficulty is anticipated in operating SOR schemes. It has been represented to us that there is a case for transferring gramophone records and tapes to the sector to which the tax-free transitional period will apply, and this is under consideration.
This is the opposite direction to that in which most interests are anxious to move. Most people are asking why they cannot have an SOR arrangement rather than why they cannot move from that to a transitional period arrangement. But we are considering the position of gramophone records and tapes, which is a trade in which there are special problems.

Mr. Joel Barnett: On sale or return, surely it is possible for goods which are not necessarily specified as being in that list to be put out on sale or return and therefore avoid double taxation if the supplier wishes to put them out on sale or return? It frequently happens in many trades for suppliers to put out goods on sale or return even though such goods are not in the list specified by the Government.

Mr. Higgins: I am sorry the hon. Gentleman has delayed me. I was just coming to that point. I have here a series


of paragraphs which deal with various points. The point the hon. Gentleman has raised is covered by the next paragraph.
For goods other than those listed in the White Paper, for which a transitional period has been proposed by the Government, sale or return arrangements are not precluded—sale or return is a commercial arrangement and Customs has no power to stop it—but any such arrangements must confirm strictly to the law, including the regulations to be made under Clause 53(7) of the Bill, if they are to affect the date on which purchase tax would become due. This must preclude schemes, including existing or in some cases dorman schemes, under which goods adopted, that is, purchased, by the retailer are collectively identified by means of a stocktaking at the end of the period. Such schemes, if they became widespread, would result in a situation much the same as under a stock rebate scheme which the Government have already rejected. They could not be properly controlled. Moreover, they would result in widespread tax-free stocks in retail shops at the start of the transitional period—I emphasise "at the start of the transitional period"—and hence the virtual certainty to the public sales at tax-free prices. This would defeat the object of the exercise, which is to avoid any price "pick-up", if that is the right expression, and achieve a smooth transition to value added tax.
The hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris), in an earlier debate, appealed to me to adopt a constructive response to the argument he put forward and that which he said my hon. Friend the Member for Hampstead would now put forward. We are anxious to be as helpful as possible to the trade. Customs would be prepared to consider whether it could accept schemes, which were otherwise satisfactory, based on identification of containers rather than of individual items, which is obviously not a practical proposition—for example, unopened cartons of tubes of toothpaste rather than individual tubes. This would mean that unopened containers could be held tax-free in retail premises and the goods would be "adopted" and the tax become due on break of bulk. We are prepared to consider this idea. We hope it might be

possible in some cases to arrange suitable schemes which could be adequately controlled. I am sure the House will appreciate that it is necessary for the control to be adequate both to ensure a smooth transition and to avoid any loss of revenue.

Mr. Geoffrey Finsberg: My hon. Friend has spoken about breaking down and has instanced toothpaste. Does it mean that if, for example, teaspoons, which are normally supplied in containers of one gross, are broken down into 12 packets of one dozen each, those could be separately identified and it would be only on the unopened, say, eleven-twelfths that the problem would arise? But suppose instead of the gross being broken down into 12 packets of one dozen each they were broken down into 144 packets of one each. Is that the kind of thing which he envisages might assist the trade?

Mr. Higgins: No. I should not wish to go further than I have already gone. My hon. Friend is an expert in these matters, and he knows that this is a complicated area. The essential point is that such arrangements would have to conform strictly to the law, including regulations under subsection (7),but Customs and Excise are prepared to look at proposals which are based on the identification of containers rather than individual items. It is essential that Customs and Excise should look at specific proposals. The essential feature from their point of view would be their ability to control the scheme effectively. We should have to judge any given proposal on its merits, because there are problems, and ultimately there would be considerable difficulty if this were carried too far.
1.0 a.m.
We do not wish to be dogmatic about the situation. We wish to examine the position on its merits and, as my hon. Friend knows, discussions on these subjects are continuing. I am merely seeking to set out the broad framework within which I think these discussions ought to proceed.

Mr. Joel Barnett: Is not the hon. Gentleman exposing the nonsense of the scheme itself? Is not he saying that to assist traders the best thing that can be done from now on is for suppliers to


supply goods on an agreed sale-or-return arrangement and then to invoice them at the date of the tax-free period?

Mr. Higgins: No. There are considerable complications here, and I am seeking to outline the broad framework of what is involved. Obviously it is a question of its being a practicable scheme which can be controlled. If sale-or-return arrangements are introduced, they must be within the terms of subsection (7), and also be such that Customs and Excise believe that effective control can be exercised. I do not wish to go into further detail now.
If one were to proceed on the basis which I have suggested, it might be that storage considerations would impose limits on the extension of such modified arrangements but, combined with the transitional period, they would provide reasonable relief for there tail trade. I thought it right, in response to my hon. Friend, to seek to respond in a constructive way.
My hon. Friend also raised some questions about mail orders. I think I am right in saying that if mail order goods are sold before 1st April, 1973,—and "sold" is a precise expression—but payment continues to be made after that date, this does not affect the tax
position. It is determined by
the point of supply. If it is before 1st April, 1973, VAT will not apply. I think that the answers the point made by my hon. Friend, but if not perhaps he will pursue the matter in correspondence with me.
That being so, I cannot recommend the House to accept my hon. Friend's Amendment which would nullify the effect of any regulations made under subsection (7) for the purpose of strengthening the power of Customs and Excise in relation to sale-or-return arrangements. I hope that my hon. Friend will accept what I have said as a statement of the overall framework within which I am sure we shall succeed in bringing about a situation in which the transition from SET and purchase tax to VAT can proceed in a reasonably orderly manner.

Mr. Geoffrey Finsberg: Perhaps I may respond to my hon. Friend's invitation and discard the other 30-minute speech that I had prepared. My hon. Friend

has an open mind, and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Dr. Gilbert: I beg to move Amendment 133, in page 37, line 15, at end insert 'but not longer than six years'.
Subsection (7) of Clause 53 gives power to the Treasury to make orders requiring traders to preserve purchase tax records for, as the Bill now stands, an unlimited period. We have had many discussions in Committee and on the Floor of the House about the powers of the Inland Revenue and I do not seek to rehearse them now. There is no point in leaving an open-ended power of this sort. We cannot envisage circumstances in which the Treasury would require documents of this sort to be kept for more than six years. We do not consider this a particularly important Amendment but we consider it to be a perfectly logical one and hope that the Government will have no difficulty in accepting it.

Mr. Higgins: The object of the Amendment is to place a limit of six years on the period for which the regulations may require records of goods received on sale or return terms to be preserved by retailers or other unregistered traders.

Dr. Gilbert: We know that.

Mr. Higgins: The House has asked us on a number of occasions to make clear what we propose in regulations which are to be made under the Bill and, where possible, to give advance notice of what those regulations are likely to contain.
I have to advise the House that the Amendment is unnecessary because our intention is that the regulations to be laid before the House soon after the Bill receives Royal Assent will provide that the limit of time for which the records in question should be retained by retailers will be only two years.
This conforms with the Commissioners' normal requirements for the preservation of records by registered purchase tax traders. That is our intention and it will depend on the regulation and whether the House approves it. We will await that event. I hope that in view of the fact that I have met the hon. Gentleman, not 100 per cent., not 200 per cent., but 300 per cent., he will feel it right to withdraw the Amendment.

Dr. Gilbert: I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 63

ALTERATIONS OF PERSONAL RELIEFS

Mr. Deputy Speaker (Miss Harvie Anderson): We come now to Amendment No. 136, in page 43, line 17, leave out '£600' and insert '£650'. It will be convenient if we take with it Amendments No. 137 and No. 138.

Dr. Gilbert: The Amendment is self-explanatory. We have discussed these matters at great length already and, while it would be possible to have a general economic debate about it, I hardly think that it would be in harmony with the wishes of the House. I hope that on this occasion it will not be necessary for the Government to explain to us what our Amendment means. Unless anyone wants to say anything about it, I do not propose to move the Amendment.

Clause 64

INCOME TAX RATES FOR 1973–74

Mr. Joseph Hiley: I beg to move Amendment 141, in page 44, line 9, at end insert:
'except in the case of a man aged 65 years, or a woman aged 60 years, where the investment income to be charged at the additional rate of 15 per cent, shall be so much as exceeds £5,000'
The object of this Amendment is to give justice to a body of taxpayers who have been badly neglected and unfairly dealt with for a long time. I seek to treat those with incomes up to £5,000 a year on the same basis as that which the Budget provides for incomes up to an amount of£2,000. Justice demands that this should be done for all bodies of taxpayers who come within this bracket. My Amendment is restricted to the relief being given to those who have attained 65, in the case of men, or 60 in the case of women or, as it is usually put, those who are old pensioners.
We have for a long time accepted that there is a distinction between what is usually known as earned and unearned income. So far as I can trace, dis-

crimination of this kind started in 1806 and lasted until 1816. It was then decided to scrap it. They were apparently so ashamed of it, according to column 1201 of Hansard of 18th April, 1907, that Mr. Brougham moved
that all the records of the tax should be burnt or destroyed, in order that posterity should never know that such a tax had existed".
Those men were wise in that they realised how iniquitous it was that there should be such discrimination.
The next time the question was considered was in 1907. Mr. Asquith, the then Prime Minister, talking about the general principles and quoting Mr. Gladstone, who was opposed to the idea of unearned income, said this:
Take the poor widow with £300 a year derived from investments, and bringing up a family; is she to be placed in a worse position and to be taxed at a higher rate than the small business or professional man making £300 a year from his business?
I pose the same question.
A Select Committee was set up in 1906. It bandied about suitable words to describe the distinction between the two types of taxpayer. It had to consider the practicability of differentiating between permanent and precarious incomes. The Select Committee
felt it desirable to define clearly the meaning of 'permanent' and 'precarious'.
In those days, apparently, precarious earnings were those derived from trade, industry, or the professions, whereas permanent earnings were attached to those who enjoyed the advantage of investment in funds, and so on. How times have changed. Today those descriptions could well be reversed. Particularly in view of the rate of return from the funds, they are now the precarious investments and earnings derived from industry and the professions are much more secure.
The Select Committee's Report says this:
Other terms which have been used are 'industrial' 'spontaneous', 'earned' and 'unearned', and incomes resulting from 'investment' and 'personal effort'. It is obvious that there are incomes from investment which are not 'permanent'. There are also incomes which are 'earned' by 'personal effort' and which are less 'precarious' than many which are derived from investment. Probably the words 'earned and unearned' most accurately represent the distinction we have in our minds.
I do not agree with that.
It is interesting to note that that Select Committee, in setting a figure at which there should be this discrimination, suggested £3,000, and that was 66 years ago, although ultimately Mr. Asquith plumped for £2,000. In view of the fall in the value of money in the intervening years, the suggestion in the Amendment is a very modest one; for money is now worth probably 10 times less than it was in those days.
I am encouraged in presenting the Amendment by the words the Chief Secretary used on 22nd March:
…hon. Members on both sides know from their correspondence how hard it is to explain to people living in retirement on income from savings, or to divorced or separated wives dependent on maintenance payments, why they should be more heavily taxed than people who have the same income in the form of pension or earnings.
He continued:
…it has always seemed to me absurd to encourage savings and yet penalise the results."—[Official Report, 22nd March, 1972; Vol. 833, c. 1643.]
That is precisely what my right hon. Friend the Chancellor of the Exchequer and my hon. Friend the Chief Secretary are doing now. There are many in that group.
1.15 a.m.
In view of the hour and of the mood of the House, I do not want to labour the point, but I believe most passionately and sincerely that a great injustice is being done to these deserving people—none of them scroungers, but people who have worked hard for a very long time; who have not relied on money from someone else—not that there is anything wrong in that—but who, by their own efforts, have earned and saved. It is the responsibility of the Chancellor of the Exchequer to give such people every encouragement to save in the future.

Mr. Patrick Jenkin: My hon. Friend the Member for Pudsey (Mr. Hiley) will perhaps forgive me if I do not follow him in his references to Asquith and the events of 50 or 60 years ago, though I listened with fascination to the product of his researches.
Instead, I shall confine myself to dealing with the substance of the Amendment and the case which he has put before the House. It is a case which I under-

stand, and with which, I know, many of my hon. Friends will have sympathy; namely, that despite the great changes which will take place in our personal tax structure on 5th April next year we are still retaining, it is argued, too substantial a discrimination against investment income; and that the figure we have put into the Bill for the starting point of the investment income surcharge of £2,000 should be higher.
Perhaps I may remind my hon. Friend of what exactly has been done, or will be done—and I entirely take the point that it has not yet happened—in the course of this reform of our personal tax system; a reform for which we legislated last year, and of which the Bill contains, as it were, the signposts, and fixes the limits and rates of tax and the rate of investment income surcharge, all to come into effect at the beginning of the next financial year.
The key point in what we are doing, and it is one to which I was referring in the passage which my hon. Friend read from my speech in the Budget debate, is that the first £2,000 of investment income will be treated with limited exceptions to which I shall come in a moment, in exactly the same way as if it were earned. Under the present system, a person, however small his personal income may be, does not, if it is investment income, enjoy the benefit of the earned income relief, and is therefore taxed at a much higher effective rate.
What we are doing for the first time is to say that the first £2,000 of this investment income will be taxed at the same rate as if it were earned income. The only exceptions under the present rules are those for very small incomes and for elderly, retired people over 65, again at the lower levels; the so-called small income relief and the age relief. In these circumstances, incomes though they may be investment incomes, are treated as though earned; but above those limits, which are quite low, income does not qualify for earned income relief.
The effect of what we are doing can be seen, and I invite my hon. Friend to look at Table 18, in the red book, the Financial Statement and Budget Report for 1972–73, where we have set out the amount of tax paid by a married couple whose income all comes from investments, in the three years, 1971–72;


1972–73, and what it will provisionally be under the figures we have included in the present Bill for 1973–74.
Perhaps I may take two figures as an example. For a married couple whose investment income is £2,000 a year, the amount of tax last year was £594·81; this year it is £542·50, and by next year when the first £2,000 of investment income can be treated as earned and taxed at a basic 30 per cent. rate, the tax will fall to £367·50–27·1 per cent. this year to 18·4 per cent., which is by any standards, a substantial reduction in taxation. This is, as I said in an earlier speech, a belated act of justice in removing unfair discrimination which has affected people whose incomes cannot, by any use of language, be described as substantial.
May I take the level which my hon. Friend used as an example, someone who has sold a business, has retired, and is enjoying the investment of the proceeds—a married couple with an income of £5.000 a year. They paid £2,238 in 1971–72; they will pay £2,186 this year, but next year they will pay £1,717, again a substantial reduction from an effective rate of 44·8 per cent. last year to 34·4 next year.
I have had substantial correspondence with my hon. Friend, and the main point is that because it is taking two years from the Budget last year to 5th April next year to implement the massive reform which this unified personal tax system represents, the benefit for these people has not yet accrued. I can understand the impatience which many people feel. Many of them are getting on in years and are not sure how much longer they have to live. They are suffering a sense of injustice in that a substantially higher rate of tax continues to be charged.
Next year, the relief we intend in our unified system will take place and they will enjoy the benefit and will feel subject to a much fairer system of taxation that for many a long year past.
I believe that although hon. Members opposite have quarrelled with the starting point and the rate of surcharge, they have all acknowledged that my right hon. Friend's reform in this unified tax system is not only long overdue, but will be a greatly improved and a much fairer system for the general body of taxpayers.
While I can understand my hon. Friend's concern on behalf of this his constituents, obviously as he described them a wholly admirable and worthy people, I ask him to pass on to them a message of hope, and a request to hold out a little longer, a message that next year the relief they seek will be given. We could not go beyond £2,000 this year. I think the £2,000 my hon. Friend mentioned from 67 years ago was directed to a different point, not to earned income and investment income. We could not go beyond that because it would seem that beyond that the benefits in terms of tax reductions to the people with more than the smallest investment incomes would be such that it would be difficult to justify. I believe that we have hit the right level. I do not say that it will stay there for all time. Obviously it will not. But the general pattern of the tax we have introduced is one which has commended itself to a very substantial majority in the House. I hope that my hon. Friend will feel that we have proceeded in the right direction and that he need not press his Amendment tonight.

Mr. Hiley: I am most disappointed by that reply. What the Chief Secretary has said has merely convinced me more and more how right I was to move the Amendment.

Mr. Dalyell: Have a vote.

Mr. Hiley: However, I am happy that my hon. Friend said that he did not want to deal with the references to 67 years ago. I hope that between now and next year he will take the opportunity of reading them. He will then find that what I said was correct, and probably that will influence him to be a little more generous when the time comes again.
I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 65

CAPITAL ALLOWANCES

Mr. Patrick Jenkin: I beg to move, Amendment No. 143, in page 45, line 16, leave out from 'a' to end of line 18 and insert:
'grant made under Part I of the Industry Act 1972 or such grant made under an


enactment of the Parliament of Northern Ireland as may be declared by the Treasury by order made by statutory instrument to correspond to a grant made under the said Part I.
A statutory instrument made under this section shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament'.
The Amendment is necessary now to bring the Finance Bill into line with the Industry Bill which is at present going through Parliament. We could not do it when the Bill was written because the Industry Bill had not then been introduced.
The Amendment also deals with the question of investment grants in Northern Ireland. The House will know that the pattern of investment incentives in Northern Ireland is not the same as it is in the rest of the United Kingdom. We are therefore proposing to take power, by the Amendment, to make regulations to allow us to define the particular investment grants in Northern Ireland which will get what I might describe as the tax free treatment which is to be applied to the investment incentives under the regional development grants under the Industry Bill.
The Amendment therefore deals with both those matters. I hope that the House will accept it.

Amendment agreed to.

Clause 69

TEMPORY DISREGARD OF INCREASE IN CERTAIN PENSIONS AND ALLOWANCES

Mrs. Sally Oppenheim: I beg to move, Amendment No. 144, in page 49, line 37, after '1972–73', insert
'and to each annual increase for five successive years'.

Mr. Deputy Speaker (Miss Harvie Anderson): With this Amendment it would be convenient for the House to discuss Amendment No. 145, in line 38, leave out 'charged for that year'.
No. 146, in line 38, leave out 'for that year' and insert
'during the subsequent twelve months only'.
and No. 147, in line 40, at end insert
'and such disregard, from April 1973 onwards, shall apply only to single persons with an

annual income of £900 or less, and to married couples with an annual income of £1,300 or less'.

Mrs. Oppenheim: In submitting these Amendments I am forcibly reminded of the words of Lord Clive when answering a Parliamentary Committee about his acquisition of today's equivalent of £5 million during his governorship of India, when he said, "By God, Mr. Chairman, at this moment I stand astounded at my own moderation."
Those are precisely my sentiments in moving the Amendment, which, together with the other Amendments, by a strange coincidence would cost the Revenue the same amount of money on an annual basis for the next five years.
The purpose of this complementary group of Amendments is to extend the tax relief that the Chancellor has given to the pension increase for this financial year to the pension increase in subsequent years on a non-cumulative basis to pensioners within certain income limits over the next five years. I hope that the modesty of the Amendments will commend them to my right hon. Friend. Indeed, I think that we have been far too modest. I would dearly have loved to have asked for the whole £175 million-worth and to have exempted all the National Insurance, widows' and war widows' pensions from tax. But as we have combined realism with modesty, I hope that my right hon. Friend will take note of that, too.
1.30 a.m.
It would be less than fair to my right hon. Friend, however, not to acknowledge at the outset that the problem of the taxation of pensions has intensified as a result of two measures of which he and his right hon. Friend the Secretary of State for Social Services can be justly proud, the introduction of the annual review of pensions and the measures in Clause 69 of this Bill. I know that the latter measures were introduced partly for administrative expediency, but I refuse to believe that it was not done partly also as a kind and imaginative gesture. Both measures have been widely welcomed on both sides of the House, and even my Labour opponent in Gloucester has been moved to pay a tribute in a roundabout way to what has been done by saying that it is a tragedy that the Tories have had to show


Labour the way in introducing the annual review of pensions, and of course he was quite right. No Labour Government have ever done such a thing. They have always significantly raised taxes rather than diminish them.
I know also that my hon. Friend the Member for Norfolk, North (Mr. Ralph Howell) presented one aspect of this problem in most eloquent fashion in the Standing Committee, as did my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) by his Amendment to Clause 63. While I cannot hope to match their eloquence, I make no apology to the House even at this late hour for raising another aspect of the problem.
It is impossible to overstate the bitterness and sense of grievance and injustice which is felt by those pensioners who have to pay tax on small pension incomes—People who have paid tax on every penny they earned throughout their working lives and who, thanks to a Labour Chancellor, have since 1965 been paying tax on their national insurance contributions as well.
Quite the hardest hit is the war widow who has neither age exemption nor age relief. Almost as hard hit are those pensioners who, in addition to their national insurance pension, have a small income either from an occupational pension scheme or from earnings or savings. These are people who have managed to save a little at a time when this could be achieved only by substantial self-denial, people who are prepared to go on working after their retirement age in order to provide themselves with a few comforts for their old age without having to ask for supplementary benefit, women who have sacrificed their husbands in the defence of this country—all of them penalised by a form of double taxation and the confiscation of long-term benefits awarded for a specific purpose. Many of them are no better off—some are even worse off—than those who have done neither. I emphasise that I intend no criticism of those who have not been able to save. I sympathise with them. But I have the deepest admiration for those who have.
Again, it is difficult to criticise my right hon. Friend on this score, because he has done so much for many millions

of pensioners this year by raising the tax threshold. I hope that the House will be as grateful as all pensioners are for that measure.
There is a serious problem here. Although the proposals in Clause 69 are made with kind intent, I wonder whether their effect will turn out to be cruel when next April comes. At the beginning of the second half of the pension year, when the purchasing power of the pension is beginning to decline towards its lowest ebb for that year, suddenly, millions of pensioners will be assessed for tax on this autumn's pension increase, at a time when they can least afford it. It may be as little as 50p, but I remind my right hon. Friend that 50p can be the week's electricity bill for an elderly couple.
Here are two case histories from my own constituency files which illustrate the iniquitous nature of the present tax system on small pension incomes. They show how people will be affected in 1973 if these Amendments are not accepted.
Mrs. X is a war widow, under the age of 60. Her husband was killed aged 23, one day before his promotion would have reached him in the post, a promotion which would have left her with a far more comfortable pension. She has struggled to bring up their child on a small pension income and some part-time earnings. I need not tell the House what a struggle that has been. Her pension is £8·05. Her earnings are £3·38. On this meagre income in the year 1971–72 she was paying tax at the rate of £1 a week. Since April, thanks to the Budget measures, she has been paying no tax at all. Apparently, she is one of those millionaires who, so the hon. Member for Oldham, West (Mr. Meacher) is always telling us, are the only people to have been helped by the Budget this year.
Even when she gets her pension increase this autumn she will continue to be exempt from tax so that her real income this autumn will be £12·43. But assuming an increase at the same rate the following autumn her real income will then be £12·83, only 40p higher than it was a year before, a mere fraction of her actual pension increase, and moreover a sum of money that could not keep pace with even a modest rate of inflation.
Then there is Mr. Y, a married pensioner who earns £12·68 as a part-time security guard. He has a 23p railway pension. His national insurance pension for himself and his wife is £8·80 after earnings rule deductions, so his real income in 1971–72 was £18·36. Once again since April his tax has been reduced to £1·91 and his real income even after he has paid tax at the reduced rate after his pension increase this autumn will be £21. But assuming a pension increase at the same rate in 1973 he will be paying tax again at the rate of £2·76 a week. So his real income will be only £21·35, 35p more than it was a year earlier, once again a mere fraction of his actual pension increase.
I have an enormous file on pensioners, war widows and others who, if the Amendments are not accepted, will be left with a derisory fragment of their pension increase, penalised for working or saving or both. And certainly if they had done neither they would probably have been eligible for some benefit or a rent rebate or a rate rebate. An annual review of pensions will certainly not be of much help to them. By any yardstick this is a grossly unfair situation. I would like to read a few words from a constituent's letter. She is a single lady pensioner. She says:
I wanted to get a home together for myself which was not possible until I was pensionable. Having achieved that"—
after a great deal of hard work—
I wanted to get a little security for the time when I was no longer able to work. With the help of yourself and the Chancellor"—
God Bless him—
I have been relieved of tax from my pension. I am now able to secure a little of my earnings for my future need"—
so that she will not have to ask for supplementary benefit.
Is my hon. Friend the Chief Secretary going to write to this lady and tell her that in 1973 she will probably be paying tax again. Surely the least these people deserve is to be able to enjoy the fruits of their labours and their thrift. I believe that they are the salt of the earth and that they deserve recognition and consideration for the service they have given the community during the years.
My hon. Friend will no doubt argue that they are better off than national

insurance pensioners who have nothing but their pension. Of course they are and why should they not be? Who knows how they have worked to put themselves into this position? Surely it is against the principles of a Conservative Government to level down by means of taxation. Certainly Mrs. X the war widow, after her second pension increase in autumn 1973, will be margin ally worse off even than a single national insurance pensioner receiving the maximum discretionary supplementary benefits which will have risen twice since then and which will be tax-free.
Unless my right hon. Friend the Chancellor is able to raise the tax threshold in every Budget or unless the Amendments are accepted the problem will not be solved until the phasing in of the tax credit system. It is in recognition of this very welcome reform that we have put a five-year limit on the Amendments. I am already very familiar with all the Treasury arguments against them. The argument that income is income and therefore must be taxed has become rather muted since it has been pointed out that this does not apply to short-term benefits. Then there are the arguments about administrative difficulties. Surely the vast machinery of the Treasury is the servant of justice, not the slave of the system, and justice can never be a convenience. It should nevertheless be done.
My right hon. Friend, to his very great credit, has introduced a radical and far-reaching programme of tax reform. The Government's introduction of the annual review of pensions is magnificent. But I beg my right hon. Friend, if he will forgive the analogy, not to be like the cow which gives a lovely pail of milk and then kicks it over. I beg him to allow the pail to remain standing by accepting the Amendments, which, for a few million £s a year, will not only restore justice to the pensioners I have described but will restore their faith that Treasury officials and Ministers do regard them not merely as code numbers but as human beings.

Mr. Dalyell: I thought at the beginning of the speech of the hon. Member for Gloucester (Mrs. Sally Oppenheim) that here was a potential recruit to next year's silent majority on the Finance Bill.


but having looked at the faces of Ministers on the Treasury Bench I do not think there will be many changes in that direction. I found it a disgraceful speech. I wondered whether the hon. Lady had read the Official Report of any of the debates we had in Committee on the matter, when I and others raised it in a very different fashion with regard to Mrs. Denton, of Aberdeen, and others who have written on behalf of the Scottish war widows. The Minister of State has taken great trouble over that correspondence——

Mrs. Sally Oppenheim: I read the debate, and I was as impressed by the hon. Gentleman's speech as he was by mine.

Mr. Datyell: I felt that the hon. Lady's speech was not only disgraceful but rather cruel, because such a speech raises hopes where we all know very little can be done, because the cases differ greatly.
At this time of night I will not say more than that I thought the hon. Lady's speech rather revolting.

Mr. Nicholas Winterton: I strongly support the excellent case presented by my hon. Friend the Member for Gloucester (Mrs. Sally Oppenheim). She presented it in such a magnificent way that I am left with very little to say.
Many Amendments have been refused by my hon. Friends on the Treasury Bench because of the extra work that might be created or because of administrative problems. But the Amendments before us, which I fully support, reduce the work that would be undertaken by the Treasury. They would save substantial sums which could be put to better use, and reduce the large number of overtime hours worked by those within the Treasury.
When people have saved through their working lives to provide a satisfactory income for themselves, their family and their dependants once they have reached retirement age, that income should be free of tax, but this is a very difficult objective to achieve. Therefore, the Amendments to which my hon. Friend has spoken are very modest. If the Chancellor, my hon. Friends on the Front Bench and the officials have seen the

problems resulting from these Amendments they should let us know what these problems are. If my right hon. Friend will not accept these Amendments on this occasion I hope he will give serious consideration to them in future Finance Bills.
My hon. Friend has presented an excellent case, she has covered the ground thoroughly and I hope that those pensioners who will be penalised by the present situation will take courage from what some hon. Members are prepared to say in the House on their behalf.

1.45 a.m.

Mr. Joel Barnett: I am compelled to say a few words, even at this late hour. We on this side of the House, as will be well known from Amendments we have moved, throughout the Committee stage have wanted to help precisely the people the hon. Member for Gloucester (Mrs. Sally Oppenheim) was speaking about, but we cannot take the way in which she delivered her speech and some of the things she said.
I speak for myself, and I hope she will forgive me when I say that I thought her speech was a lot of humbug. I had not intended to speak on the Amendment, but hearing the hon. Lady speaking from the benches opposite as though her heart were bleeding and with appropriate facial expressions about the poor old widows I find it hard to take——

Mrs. Sally Oppenheim: Mrs. Sally Oppenheim rose——

Mr. Barnett: No, I cannot give way——

Mrs. Oppenheim: Why will not the hon. Gentleman give way?

Mr. Barnett: Because the hon. Lady has come into the debate and has spoken at 1.30 a.m. with very little, indeed nothing, to say except something which I find distasteful. I intend to say so and I have said so. If she does not like it she can speak again and say she does not like what I have said. I do not like what she has said. Those are my views and, I think, the views of my hon. Friends. It is important to put them on the record and I am delighted to do so.

Mr. Patrick Jenkins: That was one of the most extraordinary attacks I have ever heard in the House. My hon. Friend the Financial Secretary suggests that the


hon. Member for Heywood and Royton (Mr. Joel Barnett) must be getting tired, but I think the truth of the matter is less admirable than that. It sticks in the gullet of the Opposition when they hear anybody on this side of the House seeking to defend the interests of those with low incomes. I cannot see why the Labour Party should claim a monopoly in compassion as it always does. But my hon. Friend the Member for Gloucester (Mrs. Sally Oppenheim) is perfectly capable of defending herself. A propos of my hon. Friend's analogy, my right hon. Friend has no intention yet of kicking the bucket, whether full of milk or otherwise.
I listened with care to what my hon. Friends the Members for Gloucester and Macclesfield (Mr. Winterton) said on the subject of the Amendment, but I do not think it will altogether surprise them or the House if I say that I cannot advise the House to accept it.
The Amendment is hung on Clause 69, which was introduced following an announcement by my right hon. Friend in his Budget statement, after he had announced the pension increase this year and the social security uprating—and I very much welcome what my hon. Friend said about the annual uprating which is a great stride forward in our social security system. My right hon. Friend said:
Because the Inland Revenue is so heavily committed to work in preparation for the unification of personal taxation, and it cannot this year undertake any extra PAYE recoding work, the increase in national insurance pensions and war widow's pensions payable in 1972–73—and I had better stress only the increase, and only in 1972–73—will be tax-free." [Official Report, 21st March, 1972; Vol. 833, c. 1356.]
In the debate on the earlier Amendment moved by my hon. Friend the Member for Pudsey (Mr. Hiley) I referred to the unification of income tax and surtax. My right hon. Friend has explained, as I have, that this involves, this year, the complete recoding of every PAYE taxpayer in the country to prepare for the beginning of unification. That meant that we had to make a number of administrative short cuts in order to allow sufficient time and space for the Inland Revenue staffs in the tax offices to be able to tackle this mammoth task. One suggestion put to us by the Inland Revenue was that to avoid the recoding of pensioners as a result of the uprating

of the national insurance pension and the war widows' pension we should allow, this year, no recoding to take place, which has the inevitable consequence that the increase this year—that is, up to 5th April, 1973—would be outside the charge to tax.
Do not let anybody get the idea that that was an easy decision, or that in terms of equity it makes any sense at all. It is simply an administrative short cut. It is important to recognise that fact.
I want to make three points in that connection. Many people of pensionable age who have not retired—my hon. Friend referred to some—and who are therefore not drawing the national insurance pension and therefore derive no benefit from this Clause, could justly be aggrieved if people of the same age who had retired and had pensions,—and in many ways exactly similar incomes—were allowed tax relief. We have to face that this year, but we could not regard it as a permanent feature of the system.
Secondly, the effect of giving this tax relief this year is to give relief to pensioners who have enough income to pay tax, without being able to do anything for the people on much lower incomes who are below the tax threshold. That was certainly not the objective of the exemption, but it happens to be an unavoidable consequence. When I say that this year the age exemption limit for a married couple is £929 while the national insurance pension for a married couple is £504 one sees that the pensioner must have considerably more than £8 a week in income from pay and pension before he can benefit from this temporary concession.
Thirdly, the general principle that we apply is that if resources are available to improve the lot of the pensioners—I agree with much of what my hon. Friend said about the desirability of doing this—it is not necessarily the most effective way to do it through the tax system, because that can, by definition, benefit only those who are within the tax net. Instead, it is better to use the resources to uprate benefits, because that helps all—within the tax net or not.
All those three points can be defended for one year as a necessary administrative short cut, to allow the major tax reforms—which have been widely welcomed by


hon. Members on both sides of the House—to take effect, but I cannot believe that any one of the features to which I have referred would be welcomed as a permanent feature, or even for a period of five years. I take the point that my hon. Friend made about the tax credit scheme in our taxation system. If we felt able to go beyond the increases in the age exemption limits, if we wanted to help those elderly taxpayers, it would be much better to use one of the traditional ways, either by raising the tax exemption limits further—although they have been increased by £104 this year—or alternatively by using the resources to increase the annual uprating of pensions. It simply would not make sense in terms of equity to take this particular course.
The Opposition put down an even odder Amendment, which I believe we are also discussing. Under that Amendment, any future upratings would be taxable but this year's slice of increase would remain tax-free in perpetuity. That would be an even more undesirable way of dealing with the matter.
Perhaps I have said enough to indicate that this could not become a permanent or even, I think, a five-year feature of our tax system, but perhaps I may mention one other matter. I do so with hesitation but it is a point which it is right for me to make from the Treasury Bench. The Labour Party, as we know from the Budget speech of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) in 1969, hankered after some form of unification of income tax and surtax. Goodness knows, it had been pressed upon him often enough from his side of the House by the hon. Member for Heywood and Royton (Mr. Joel Barnett) and the hon. Member for Ashton-under-Lyne (Mr. Sheldon). The right hon. Gentleman never felt able to do it. He always pleaded that the administrative constraints made it impossible.
If one is to overcome the administrative constraints—and for this my right hon. Friend deserves enormous credit, as does the Inland Revenue—one has to be prepared to make administrative shortcuts. One has to be prepared, if necessary, to incur the unpopularity or do things which one might not otherwise have done because they offend principles of equity or of the tax system.
If one is to do this, if a Chancellor is to be prepared to accept a measure like Clause 69 of the Bill, which one would not have introduced on grounds of equity—the temporary exemption for half a year of a pension increase—it makes it extremely difficult if it is then seized upon by hon. Members, on either side of the House, who say "Now that the Government have done it for one year, they can make it permanent", as the Opposition would have wanted, "or they can continue it for five years." What happens next time is that when a Chancellor who wants to undertake a major reform is told that it can be done only by making a shortcut of the sort we are discussing he says that he cannot risk doing it because, however much one says in the Budget speech
and I had better stress only the increase, and only in 1972–73".—[Official Report, 21st March, 1972; Vol. 833, c. 1356.]
there will be people who, with the best will in the world and from the highest of motives, will say "Now you have done it once, you can do it again and again".
If a Chancellor is to resist that argument, it must mean that the House in its turn must recognise the reality of the situation and not seek to press the perpetuation of what is intended merely to be a temporary, inevitable, administrative shortcut—inevitable if we are to carry out the major reform.
I hope I have explained to my hon. Friend that we have very great sympathy for the needs of the pensioners, particularly the categories of working and saving pensioners to whom she referred, that we believe we are dealing with that in the most effective way by the annual upratings of pensions on the basis described by my hon. Friend, by substantial increases in the age exemption and, therefore, the tax threshold of pensions and that we could not accept, even for five years, that Clause 69 should be perpetuated in the way suggested in her Amendment.
I recognise my hon. Friend's motives in putting forward this point. I ask her to recognise the Government's in my advising the House that we cannot accept her Amendment.

Amendment negatived.

Clause 76

APPROVED SHARE OPTION SCHEMES

2.0 a.m.

Dr. Gilbert: I beg to move Amendment No. 151, in page 54, line 21, leave out from 'Act' to 'and' in line 22.
The effect of the Amendment is to delete the option in subsection (l)(a) that the acquisition of shares by a participant in a scheme can benefit from the provisions of the scheme if the scheme had been approved at some time after it had been in effect.
We see no reason why schemes which had been in effect before they were approved should benefit from the provisions of this legislation.

Mr. Patrick Jenkin: This would be an unreasonable and unnecessary limitation on the operation of share option schemes. If a company makes sure that its scheme is capable of being approved, there is no reason why it should wait for the formal approval before putting it into operation. If subsequently something has gone wrong and the scheme fails to be approved, the tax consequences will follow and the participants in the scheme will find themselves with an unwelcome surprise.
There are provisions in para. 3 of Part 1 of Schedule 12 of the share option legislation making it impossible finally to approve a scheme until it is known what the share acquisition price and the market value of the shares will be. Inevitably, therefore, approval has to be postponed until after the scheme is in operation. If the Amendment were accepted, that kind of scheme would become impossible.
It may be that the hon. Member for Dudley (Dr. Gilbert) is afraid that a scheme might be approved which differed from the scheme as it was when the shares were issued and that therefore shares might be issued on more favourable terms than the Revenue would approve. There is no fear of that. If the Revenue does not approve a scheme as it was at the date when it was issued, clearly those shares cannot claim the benefit of the scheme.
I hope that the hon. Gentleman will perhaps feel that his Amendment goes a bit too far and is unnecessary.

Amendment negatived.

Clause 77

SHARE INCENTIVE SCHEMES

Mr. Nicholas Edwards: I beg to move Amendment No. 166, in page 55, line 34, at end insert:
'or
(d) the sole or main purpose for which the right or opportunity referred to in subsection (1) of this Section was conferred or offered to the person making the acquisition was either to provide permanent capital required by the body corporate for the purposes of its business or to enable a member of that body corporate to dispose of the shares acquired by the person making the acquisition'.
In Committee on 21st June, my hon. Friend the Chief Secretary introduced an Amendment to ensure that the Clause would not strike at ordinary profit sharing schemes and to exclude from the Clause
…shares which a person acquires as a director or employee if they are not subject to any special restrictions and are not of a class held mainly by people who have acquired them as directors or employees. It was not the intention of this legislation to hit at either the profit sharing scheme or the case where shares are acquired in a normal way unconnected with any of the features of a share incentive scheme. The Bill went further than this, and the Amendment will correct it.
My hon. Friend the Member for Surrey, East (Mr. William Clark), who had raised the matter, said:
…the thing that was worrying me was that somebody might join a company as a director. One of the conditions is that he subscribes to shares in that company. Subsequently, if business prospers and he realises his shares he will not be subject to capital gains tax but will be subject to Schedule E."—[Official Report, Standing Committee E, 21st June, 1972; c. 1257–8.]
The Amendment went a long way to meet that fear.
However, the language used is still so wide that I am advised that when interpreted by the courts it is possible the Clause could be held to penalise directors or employees of a company who have acquired shares as a genuine straight forward investment rather than as beneficiaries of a share incentive scheme in the normal sense.
If I understand what my hon. Friend said in Committee, surely it was the Government's intention, and it would certainly be mine, to exclude from the operation of Clause 77 two cases. First, persons who happen to be directors or


employees or those who are about to become directors or employees who are asked to provide finance for a company as an investment; and, secondly, a shareholder of a close controlled company who wishes to dispose of his shareholding and sell it to the other working directors or employees.
In both these cases the acquisition of shares by directors or employees could be said to have arisen because of the opportunity which occurred by virtue of their directorship or employment. As there is doubt about this matter and about whether the Clause fulfils the intention stated by my hon. Friend in Committee, I hope he will either accept the Amendment or take some other action to remove that doubt.

Mr. Peter Rees: I hope it will not be thought churlish if I press my hon. Friend the Chief Secretary on this Amendment at this stage of the night, particularly when he has gone so far to still our doubts on many aspects of share option and share incentive schemes.
It strikes me, as it did my hon. Friend the Member for Pembroke (Mr. Nicholas Edwards), that possibly Clause 77 is still too tightly drawn in that it may, through inadvertence, catch people who are not taking part in any true sense in a share incentive scheme. That must be the rationale underlying Clause 77. Indeed, the side note entitles it "Share incentive schemes".
I understand the Clause is meant to catch schemes which provide some kind of concealed reward for services provided by directors and employees; in other words, a reward which, had it not been conjured up in the form of a share incentive scheme, might have been assessable under Schedule E.
There are certain situations which might be caught by Clause 77, although not providing any incentive in the true sense. My hon. Friend has mentioned small companies where all the shares are held by working directors. There are two situations. First, that company may require fresh capital. In that situation it is obvious that the directors will wish to keep the capital within their hands and they will, therefore, be encouraged to subscribe that fresh capital themselves. In that situation they would have taken up shares as a result of an oppor-

tunity offered to them as directors of that company.
The second situation is where a director retires and, because all the shares are tightly held and intended to be held by working directors, he passes on his shares to the incoming director. Again, that incoming director acquires the shares as a result of an opportunity offered to him as a director, and Schedule 12 describes a director as one who is not only a director, but about to become a director.
My hon. Friend the Chief Secretary may say that these cases are covered by Clause 77(2), particularly paragraph (c) which provides,
the acquisition was of shares which were not subject to any restriction other than restrictions attaching to all shares of the same class".
In the kind of situation I envisage, the shares would probably be of the same class.
However, a second condition has to be satisfied if such a scheme is to be outside the scope of Clause 77. The second condition is,
and the majority of shares of that class were acquired otherwise than as mentioned in subsection (1) above.
That is, otherwise than in pursuance of an offer to the public.
In such a tightly held company it may be that the shares are always passing from one outgoing director to an incoming director or have always been subscribed for by directors and employees of that company. In that case, therefore, the let-out provided by subsection (2)(c) would not be available.
It is not only my view but the view of many people better instructed than myself in the City that the Clause will catch these quite innocent schemes. I hope, therefore, that my hon. Friend will look favourably at the Amendment which is carefully drawn and designed to let out those schemes which are not in any true sense of the word share incentive schemes. If my hon. Friend is not able to accept the Amendment, I hope he will assure us that an equivalent Amendment will be introduced at a later stage.

Mr. Dalyell: In Committee I raised the question of surveyors, and I should like to take this opportunity to thank Treasury Ministers and their officials for


a number of letters which I have received, over which they have taken a lot of trouble. The Minister said in his letter that
if the exception was extended to include all the professional and confidential advisers who could claim a comparable position it could substantially undermine the usefulness of the Inspector's power to require information.

Mr. Patrick Jenkin: I appreciate what the hon. Member for West Lothian (Mr. Dalyell) said, and his kind words will be taken note of in official circles.
I should like to respond to the Amendment moved by my hon. Friend the Member for Pembroke (Mr. Nicholas Edwards) and supported by my hon. and learned Friend the Member for Dover (Mr. Peter Rees) in the spirit in which they put forward their case. I cannot accept the Amendment as it appears on the Notice Paper, mainly because it imports a motive test, and it has been the experience of the Inland Revenue that Clauses which involve a motive test are extremely difficult to administer and often fail to achieve their purpose.
The point to which attention has been drawn came to the notice of the Inland Revenue only about a week ago, when a letter was received, and with the general pressure of business—which I am sure hon. Members will understand—it has not been possible to examine all the ramifications and possibilities to which the suggestion gave rise. We were not, therefore, in a position by the end of last week to put down an Amendment, or even to decide whether the Bill required to be amended, or whether there was a problem which ought to be looked at.
As the result of the limited studies which we have made, reinforced by the arguments which have been advanced tonight, I think I can say that we would want to look at the matter further, as it is by no means beyond doubt. We shall consider dealing with the matter next year if it is shown in practice that there will be, or could be, real difficulties in the field.
No substantial problem is likely to arise during this year, as liability under the Clause in respect of the normal shares could arise only on the disposal of the shares acquired after 5th April, 1972. If, however, amending legislation should

be found to be necessary next year we shall, in the light of the statement that I am making now, consider making it retrospective to 6th April of this year. It would be a relieving and not a charging provision.
In the meantime, if the Inland Revenue comes across any case in which liability arises under the Clause in circumstances which appear to be outside the intended scope of the legislation, it will consider most carefully what action should be taken. I am sorry that I cannot be more definite about it, but we have had such a short time in which to consider the matter. Nevertheless, I hope that my response will make my hon. Friend feel that he does not need to press his Amendment.

Mr. Nicholas Edwards: I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule 12

SHARE OPTION AND SHARE INCENTIVE SCHEMES

Mr. Patrick Jenkin: I beg to move Amendment No. 152, in page 139, line 28, leave out 'difference between' and insert 'amount by which'.
Perhaps I may deal also with Amendments Nos. 153 and 154.
These are minor drafting Amendments intended to rectify defects in the wording of paragraph 5(2) of Part IV. If any hon. Member wants an explanation of the Amendments I can give it, but perhaps I need not do so otherwise.

Amendment agreed to.

Further Amendments made: No. 153, in page 139, line 30, leave out 'and' and insert 'falls short of'.

No. 154, in line 30, leave out reducing' and insert 'adjusting that value and'.—[Mr. Patrick Jenkin.]

Schedule 13

LEASES—TRANSITIONAL PROVISIONS

Amendment made: No. 155, in page 143, line 4, after 'April', insert '1972'.—[Mr. Patrick Jenkin.]

Clause 89

GROUP INCOME

Mr. Patrick Jenkin: I beg to move Amendment No. 157, in page 71, line 29, at end insert—
'(4) Any election which has been made for the purpose of subsection (1) of the said section 256 as originally enacted and has not ceased to have effect by virtue of section 257 (3) or (4) of the Taxes Act before 6th April 1973 shall be treated as having been made also for the purposes of subsection (1) of the said section 256 as substituted by this section'.
I gave an undertaking in Committee that we would meet this point. This Amendment is intended to meet the undertaking.

Amendment agreed to.

Clause 93

MITIGATION OF CORPORATION TAX LIABILITY OF SMALL COMPANIES

2.15 a.m.

Mr. David Mitchell: I beg to move Amendment No. 190, in page 76, line 25, leave out '£15,000' and insert '£100,000'.

Mr. Deputy Speaker (Miss Harvie Anderson): With this we can also discuss Amendment No. 223, line 23, leave out from 'determined' to end of line 32 and insert
'from time to time by Parliament'.

No. 192, in line 25, leave out '£15,000' and insert '£75,000'.

No. 191, in line 26, leave out '£25,000' and insert '£125,000'.

No. 193, in line 26, leave out '£25,000' and insert '£100,000'.

Mr. Mitchell: This is the last Amendment to be selected for this evening, but by no means the least important. It is interesting, because this subject was one of the few occasions in Committee when the Minister failed to win the argument.
The Government's purpose in changing to the imputation system of corporation tax is to encourage distribution and to secure a better use and allocation of national resources through the media of the market. That is an approach with which I find myself in agreement.
It follows that it is wholly illogical to apply that system to companies not quoted on the market and which do not raise their finance through the market. We have in the unquoted companies, particularly the smaller ones, a large group of companies which will be made worse off in many cases as a result of this change. It seems wholly illogical to apply this system to those companies since they will not react to the market and raise their resources through it, but through plough-back. It means for them an effective increase in corporation tax from 40 per cent. to 50 per cent.
I am aware that the Government will say that if the company ploughs back in full into those assets eligible for capital allowances it will not be any worse off, but the reality is that if one talks to the Small Businesses Association or to companies throughout the country they will say that it is not the money they need for ploughing into plant and equipment, which are eligible for capital allowances, but the money they need for working capital, for debtors, stock in hand, work in progress and so on. There are innumerable companies, particularly in the growth sector of the economy, which need substantially more money for working capital for a variety of purposes. They will be the sufferers if we do not secure a change.
The Amendment seeks to extend the preference rate for small companies from £15,000 to £100,000. I should like to make it apply to all unquoted companies, but I accept the Government's argument that it would be unfair to have two companies of the same size, one with a different rate from the other. It is true to say that companies which are too small to be quoted on the Stock Exchange, namely those whose profits are under £100,000 a year, ought not to be brought into this system.
In saying this I am backed by the CBI which says in a letter I have that it is anxious that the figure should be raised. It is reasonable to take as a yardstick the figure which would enable a Stock Exchange quotation to be obtained. It suggests a figure of £15,000. There is an alternative Amendment if the Government wish to accept it. Alternatively, the Engineering Industries Association suggests a figure of £100,000 which forms the basis of this Amendment.
The case has been made fully in Committee and I have merely reminded the House of it tonight. The Government have not given an adequate answer and I hope that this will give them the opportunity of doing so.

Mr. Nicholas Ridley: I apologise to the House for joining the debates on the Bill rather late. I take this opportunity of expressing my deep gratitude to my right hon. Friend the Chancellor of the Exchequer for having included the concession to small businesses. As the one-time Minister for small firms, I believe that it is of immense value. It was wise that my right hon. Friend made a concession, because this is the area from which the great businesses of the future grow.

Mr. Barber: A number of the changes that I made in the Budget for the benefit of small businesses were the result of the points made to me by my hon. Friend when he held the position to which he has referred.

Mr. Ridley: I am grateful to my right hon. Friend.
The algebraic legislation, including the fraction (M - P) X I/p for marginal profits between £15,000 and £25,000, has slightly perplexed me. Has there ever been any indication of the fraction which will be applied to this fraction to form the marginal small business rate; because I have not heard that mentioned?
It may be a mistake to include in the Bill the amount of the profits which are the minimum and maximum levels. Inflation is eroding money values, and to be committed by legislation to the values is unwise. As time passes, the figures in the Bill may be found to be too small. Perhaps we should have higher figures because of the effect on small businesses of the ravages of taxation.
We are trying to do two things—first, to help the genuinely small business which must plough back its profits to grow and to live and, second, to avoid the difficulty which occurs because a small company which distributes none of its profits is, under the new form of corporation tax, worse off than under the old form. It is right to address oneself to putting that discrepancy right. I am doubtful whether

it is a good idea to give relief to small businesses irrespective of how much they distribute. We are trying to give this relief to small businesses which suffer because they do not distribute and, therefore, they pay more tax out of the savings which they retain for the purposes of further investment and growth.
Is it possible to keep the decision as to limits for small business relief to Parliament and perhaps next year to devise a scheme whereby the benefits are reserved for small companies which do not distribute and which do not, therefore, have the same advantages as floated companies which can raise money on the market?

Mr. Robert Redmond: My hon. Friend the Member for Basingstoke (Mr. David Mitchell) spoke of the need for companies to plough back profits to finance book debts and the like. Many small companies are trying to save up capital to pay for future investment in the way of buildings. I feel that profits retained as cash in the bank by small companies should very often be given some relief if it can be genuinely shown that some investment lies ahead.
I know that the Government will say that there is free depreciation now on plant and machinery, but many a small company is at this very moment trying to save money to pay for perhaps a new building in order to create new jobs in the areas where we want them. If we could get back to something like the old Chancellor's "umbrella" which allowed for that sort of thing, we might be able to improve this Bill or the next Finance Bill.

Mr. Patrick Jenkin: I cut my fiscal teeth on the Chancellor's "umbrella". I remember, if I might mix metaphors, more years ago than I now care to think of struggling in my chambers at the Bar to steer many a small company through the maze which was Sir Stafford Cripps's umbrella, which was, of course, related to the old Section 22 companies—the surtax companies—of which the successors are now the close companies. My hon. Friend the Member for Bolton, West (Mr. Redmond) will have noted, and I am sure applauded, the very substantial amelioration in the position of close companies' shortfall provisions which my right hon. Friend has made. Not only


is the figure now 50 per cent., not 60 per cent., but a very large number of companies have been taken out of the shortfall provisions altogether.
I should like, if I may, to look at the suggestion of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) that the relief for small companies should be in some way quantified to distributions made rather than to profits. I say that entirely without commitment because I have no idea what the result may be. But it is an interesting suggestion which I should like to look into. I very much endorse what my right hon. Friend said about the great value of the consultation which we in the Treasury had with my hon. Friend, with his experience as Minister in charge of small businesses.
I come, finally, to the point made by my hon. Friend the Member for Basingstoke (Mr. David Mitchell). It must, I think, be a matter of opinion as to who won the arguments in the Standing Committee on two separate occasions, and on both occasions with very full debate. The subject of the first was the Amendment moved by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) for a suspension of the cut on unquoted companies The other debate was occasioned by the Amendment moved by my hon. Friend the Member for Basingstoke which would have cost, we estimated, £350 million. We now come, on this third occasion, to his present Amendment which, together with Amendment No. 191, would cost between £70 million and £90 million. The more modest CBI suggestion of £75,000 with a tapering up to £100,000 would cost between £50 million and £70 million. The indication of the cost is perhaps some evidence of the difficulty we would have in accepting the Amendment.
I do not want to go over all the arguments again. My hon. Friend said that one of the answers I gave was that these companies invested in plant and machinery and therefore got the benefit of the free 100 per cent. first year allowance. He must concede that I quoted a whole range of cases, including cases in, for instance, the distributive trade in which only 60 per cent. goes into investment in plant and machinery but which qualified for the 100 per cent. first year

allowance, and said that whether high or low distributors or high or low investors we had failed to find a company which was worse off than would have been the case in June, 1970.
But what I did concede was that there were certainly some companies which had benefited considerably from the tax reliefs which my right hon. Friend has made hitherto but would find some part of those benefits clawed back as a result of the change to the imputation system. Perhaps I may say to the House, as I said to the Committee, that we recognised that this was the position, and while we could not concede there being two separate systems of corporation tax for two different kinds of company existing in perpetuity, we were prepared to look at some kind of transitional relief so that the period in which companies become subject to the new imputation regime new next year can be catered for. I repeat that statement tonight.
2.30 a.m.
There is only one other point I must deal with. My hon. Friend the Member for Cirencester and Tewkesbury asked me what was the marginal rate of tax under the fraction in Clause 93. The figure is about 65 per cent. for companies with profits between £15,000 and £25,000 where they taper up.
Perhaps it would be of interest to note that at £100,000 and £125,000, the figures of the Amendments proposed by my hon. Friend the Member for Basingstoke, the marginal rate in the taper would be 90 per cent. and on the CBI figures of £75,000 and £100,000, the marginal rate would be 80 per cent. Those are very high marginal rates indeed, even for a taper and would imply, if one went as high as £75,000 and £100,000, that the taper would have to be much longer than £25,000 if one were to have anything like a marginal rate of 65 per cent. as provided for under the fraction to which my hon. Friend the Member for Cirencester and Tewkesbury drew my attention.
We are very sensitive to the arguments which my hon. Friend the Member for Basingstoke and his hon. Friends have put. We have made a genuine response in reply to the Amendment moved in Standing Committee and I hope that in


the circumstances, my hon. Friend will feel able to withdraw the Amendment.

Mr. William Clark: My hon. Friend has referred to the transitional arrangement in my Amendment in which we attempted to put the limit at £50,000 instead of £15,000. My only question is when will the House be told what the transitional arrangements will be? There is no question but that small companies, under the Bill, are to be subjected to more tax than they were originally, and the transitional arrangements are extremely important to small companies.
It is all very well for the Chief Secretary to say that transitional arrangements will be made. When will they be made and how long will the transitional period last?

Mr. Patrick Jenkin: With the leave of the House, may I reply that we recognise that this is of great importance to these companies and that we aim to give some indication of what we have in mind as soon as possible.
This is a very complex matter and I undertook that we would consult the interests concerned. I cannot say when we will be able to make any sort of announcement.

Amendment negatived.

Clause 110

REDUCTION OF TAX LIABILITY ON DISPOSALS OF SHARES IN UNIT TRUSTS, INVESTMENT TRUSTS AND FUNDS IN COURT

Mr. Nott: I beg to move, Amendment No. 159, in page 89, line 28 [Clause 110], leave out from 'of' to 'had' in line 30 and insert:
'(a) a share other than a qualifying share; or
(b) loan stock,
previously held by him, being a conversion pursuant to rights in that behalf attached to the share or stock previously held, subsections (6) and (7) above shall have effect as if that share or stock'.
This Amendment provides that the new 15 per cent. credit allowed for capital gains tax on the disposal of qualifying shares in approved trusts shall apply

without restriction to qualifying shares received on conversion of non-qualifying shares as it does to qualifying shares received on conversion of loan stock.
I hope the House understand that sufficiently well.

Amendment agreed to.

Mr. Nott: I beg to move Amendment No. 160, in page 89, line 32, at end insert:
'(9) Where the gain accruing on a disposal to which this section applies falls to be computed in accordance with paragraph 27(2)(b) of Schedule 6 to the Finance Act 1965 (unquoted securities held before 6th April 1965 which are subsequently converted or exchanged)—
(a) the period of ownership of the share disposed of shall not be treated under sub section (7)(a) above as having begun before the time mentioned in the said paragraph 27(2)(b); and
(b) for the purposes of subsection (3)(b) above the gain shall be taken to be that mentioned in sub-paragraph (ii) of the said paragraph 27(2)(b) reduced, where applicable, in accordance with subsections (6) and (7) above'.
This Amendment ensures a consistency between the time-apportionment method of restricting the 15 per cent. credit allowed for capital gains tax on the disposal of qualifying units or shares in approved trusts, and the existing time-apportionment method of excluding from capital gains tax that part of a gain which accrued before 6th April, 1965.

Amendment agreed to.

Clause 116

GIFTS TO CHARITIES, ETC.

Mr. Higgins: I beg to move, Amendment No. 161, on page 93, line 9, after 'Act', insert 'then (a)'.

Mr. Deputy Speaker (Miss Harvie Anderson): With this Amendment it would be convenient to discuss Amendment No. 162, in line 14, leave out '(3)' and insert 'and (b)'.

Mr. Higgins: These Amendments correct a drafting defect. If the House wishes, I will explain precisely what they do, but I imagine that the House may well wish to accept that this is a reasonable provision.

Amendment agreed to.

Further Amendment made: No. 162, in line 14, leave out '(3)' and insert 'and (b)'.

Clause 125

VEHICLE EXCISE DUTY— DISABLED PERSONS

Mr. Higgins: I beg to move, Amendment No. 184, in page 99, line 45, at end insert:
'(3) In section 4(1)(g) of the Vehicles (Excise) Act 1971 (vehicles not exceeding eight hundredweight for invalids) for the word "eight" there shall be substituted the word "ten" '.
The object of the Amendment is to raise the weight limit below which invalid vehicles are exempted from the payment of vehicles excise duty from 8 cwt. to 10 cwt. Improvements currently being made to the standard Department of Health and Social Security three-wheeler—improved engine, heating arrangements and soundproofing—will bring the vehicle above the present weight criterion of 8 cwt. It is obviously undesirable—indeed, it is not the Government's intention—that the introduction of these improvements should be the occasion of any loss of entitlement to the long-standing vehicle excise duty exemption for this type of vehicle. The Amendment therefore raises the qualifying weight limit from 8 cwt to 10 cwt.
The figure of 10 cwt has been chosen so as to allow sufficient margin for special modifications which may be required to the standard model to meet the needs of individual cases.

Mr. Dalyell: Is this a sign that the Treasury has taken the hint and resumed communication with the Department of Health and Social Security?

Mr. Higgins: If I may reply, with the leave of the House, the lion. Gentleman has constantly asked us, throughout the proceedings on the Bill, what consultations we have had. He has constantly asserted, following the remarks we have made, that consultations have not taken place. I assure him that communications between the Treasury and the Department of Health and Social Security, as with all other Departments, are altogether excellent.

Amendment agreed to.

Clause 131

CITATION, INTERPRETATION, CONSTRUCTION, EXTENT AND REPEALS

Mr. Barber: I beg to move, Amendment No. 219, in page 102, line 11, leave out '113 and'.
My three Treasury colleagues considered that at this time of the morning it would be safe to allow me to handle this final Amendment.
The Amendment is self-explanatory and consequential.

Mr. Joel Barnett: If it were not for the lateness of the hour, I should have a great deal to say about the slackness in drafting that the Amendment indicates. I can understand the Chancellor being put up to move the Amendment. It was a very serious flaw in the Bill; but we are prepared to let it pass.

Amendment agreed to.

Bill to be read the Third time this day, and to be printed [Bill 175].

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fortescue.]

THAMESMEAD

2.38 a.m.

Mr. Christopher Mayhew: After those rather detailed discussions on finance, hon. Members will be glad to turn their attention to a matter of great importance to my constituency.
The Thamesmead project, which was launched with wide and well-merited acclaim in 1969, with the approval of both political parties at County Hall, and which was subject to a public inquiry and some admirable public presentations, was a project for building a new town of 60,000 population, bringing its own work and industries to the area. It was a new architectural conception, to be built on marshes and strongly characterised by artificial lakes, with a marina, and built by new industrial building methods.
The basic concept was, and still is, admirable and imaginative. But the execution of the project in recent years


has been lamentably unsuccessful. The project is three years behind already. The original huge contract with Cubitts was badly conceived and is a millstone around the neck. Successive Ministers have caused needless delays over deciding cost yardsticks. Labour relations have been bad. There has been a large number of unofficial strikes and demarcation problems on the site. Finally, the first flats occupied let in the rain.
The execution so far has been a story of disappointment, delay and soaring costs. It has produced a crisis of morale, for which, in my opinion, lack of overall drive and leadership is mainly responsible.
No one can doubt that a reappraisal of the project was necessary. But what kind of reappraisal was necessary? We needed to put the project back on course, to make up the time lost, to improve labour relations, to increase amenities and work prospects, and to get more drive and more leadership behind the project. What has the Greater London Council done? It has done exactly the opposite. Fewer houses are planned in the reappraisal—more than 8,000 fewer to be built by 1981—with a longer time to build them, fewer amenities, and less public open space.
The GLC says that its reappraisal is only a forecast, something on which it might improve. It is a strange attitude to make a forecast on the assumption of continuing failure and to call it a reappraisal. It assumes no change in the GLC's attitude and capacity for executing the plan.
What changes are needed? I take, first, the density forecasts for private building. The GLC accepts as inevitable a far lower density for private housing than the master plan laid down. True, the original 100 persons per acre in the master plan was high. But the revision in the reappraisal to 40 or 50 persons per acre is much too dastic. By itself, it drops the projected population of the new town from 60,000 to less than 50,000.
It is said in defence that private developers will not build these houses at higher densities. If that is true—it has not been shown yet—the answer is not to lower the densities but for the GLC itself to build houses, to sponsor their

building, or at least to grant special loan and mortgage facilities. As far as I can see, the only reason for the GLC refusing to do this is that it is stated "not to be in line with general GLC policy". That is no argument at all. That is no reason for not, in the case of Thamesmead, taking on the responsibility for seeing that these private houses are built at a proper density.
Second, we need to speed up the building of the private houses. There is a temptation for private developers to holdback until every amenity is available on the estate. If that be so, again the answer is: let the GLC build the houses. It will have no difficulty in finding tenants from its waiting lists.
Next, I want the Minister to comment on the inadequate provision of public open space, even for the lower population now envisaged in the reappraisal. The 190 acres of public open space represents only a little over four acres per 1,000 population. When one takes away the space occupied by the lakes and high level walkways, it comes down to only only 2·94 acres per 1,000, below the basic standard for outer London boroughs.
The amount of playing field space for schools envisaged in the reappraisal plan is below the standards of the Inner London Education Authority. Fancy building a great new town, a great new conception, and failing to produce such public open space and playing fields for schools as to conform to the normal standards of the outer London boroughs and the ILEA.
The answer is to re-examine the density for private housing proposed in the reappraisal, to earmark permanently part of the reserved land at Crossness, and to see whether the amount of land earmarked for Ringway 2 can possibly be reduced.
Another point to which the Minister should reply concerns the provision of shopping and ancillary facilities. Obviously future inhabitants of Thames-mead have the right to full and proper provision in this respect, and as they are not there to lobby for it, this puts a special responsibility on the planners to bear their needs in mind. It is possible that under the reappraisal excessive provision will be made for shopping and ancillary facilities. I ask the Minister


for a firm pledge that there will be no decision to use the extra 10 acres referred to in there appraisal for shopping and ancilliary purposes without a public inquiry or without the fullest consultation with the Greenwich and Bexley Borough Councils, and, since it would be a massive change in the master plan, without ministerial consent. Will the Minister assure us that the decision will be taken only after experience is gained of shoppers' needs?
The most important point of all
concerns employment. A number of small industries employing hundreds of workers are already established in Thamesmead and more are going there. The 170 acres of industrial floorspace suggested in the reappraisal seem at first to be adequate. But these industries are not labour intensive. The industries now there and those likely to go there are likely to be more service industries, transport industries, even warehousing. There is already plenty of industrial floorspace in my constituency which is under-used or not used at all. The new factories are unlikely to create new employment and the new employers coming to Thamesmead are likely to bring many workers with them.
The prospect, therefore, looks a lot less cheerful, especially against the unemployment problem of the area. Unemployment has been a severe problem in my constituency in recent years. We used to be a traditional full-employment area but we are no longer. Unemployment has risen from about 550 in the early 1960s to 2,000 quite recently. It is not therefore only a Thamesmead problem. It is much wider and it results directly from policies of successive Governments and of the GLC.
The whole subject has been covered admirably in the Kentish Independent, one of our local newspapers. It says:
A confidential report prepared by the Government's local controlling body, the South Eastern Economic Planning Council, puts this with horrifying clarity.
It is essential that greater efforts be made to prevent premises vacated when a factory moves out of London from being taken over by another firm, and the GLC policy of acquiring premises from firms and moving them out of London has important planning implications both in providing housing land and improving the environment.
The council urge the Government to make a major contribution to the buying up of vacated premises.

That is to say that it is a policy of driving employment away from my constituency and from Greenwich while bringing tens of thousands of new residents into Thamesmead. That is nonsense. Woolwich is no longer an area of full employment and Thamesmead as a new town deserves to be treated on employment question as other new towns are treated.
We have been told endlessly that it is not the Government's fault, that no applications for industrial development certificates have been turned down recently. But that is not an answer, because so strict are the Government's regulations about IDCs that no one applies for them. Such discouragement has been given to employers to come to Greenwich that applicants for IDCs are put off. Nor is there any proof that, having been discouraged from coming to Greenwich, these would-beemployers go elsewhere. It may well be that as a result of the extremely strict administration of IDCs by the Government there is a net loss of investment and employment to the country. The success of Thamesmead requires from the Government a fresh policy aimed at full employment in Woolwich and the surrounding area. Without that, the whole Thamesmead project is in danger.
To sum up, Thamesmead is and remains a fine, imaginative conception, but it is endangered by lack of drive and leadership in execution. The reappraisal by the GLC is simply a defeatist forecast of failure. We need to take urgent action to regain momentum and in particular to increase the number of houses, to speed up their building and to increase public open space.

2.51 a.m.

The Under-Secretary of State for the Environment (Mr. Keith Speed): I thank the hon. Member for Woolwich, East (Mr. Mayhew) for raising an important subject about a part of South-East London. I cannot give him all the satisfaction he requires, because my position and that of my right hon. Friend the Secretary of State is particularly difficult, as I shall explain.
The hon. Gentleman started by briefly sketching in the history of the Thamesmead scheme. He was right to say that


the project was envisaged as a major contribution to London's housing needs, and was designed on comprehensive lines to provide for a population of some 60,000 people. Land use proposals were submitted to the then Minister of Housing and Local Government in the form of an amendment to the Initial Development Plan for Greater London. The proposals included land allocations for housing, schools, public open space, a Central Area, roads, industry and other uses. They were the subject of a lengthy public local inquiry, and were approved with modifications by the Minister in 1969. Work on the project started soon afterwards.
The GLC has been carrying out a reappraisal of the Thamesmead Scheme during recent months in the light of experience gained during the first stages of the development. As a result of this reappraisal, the GLC thinks it necessary to make certain changes to the project as originally envisaged. The most important of these is a reduction in the total population from 60,000 to between 45,300 and 48,500 and a reduction in the number of houses to be provided.
The GLC also proposes certain changes in the amount of land to be used for schools and public open space and has come to the conclusion that the original programming of the project needs revision. At the same time it is proposing certain increases in the amount of land allocated for offices, and is carrying out a review of the central area with a view to its possible extension at a later date.
The hon. Gentleman posed a number of specific questions about open space, shopping and education. The difficulty is that the planning proposals arising from the reappraisal may need to be referred to my right hon. Friend the Secretary of State at some future date, and he would then have to exercise his quasi-judicial functions in respect of them. That means that I cannot tonight, or perhaps until further action has been taken in respect of the Secretary of State, comment on the merits of the GLC's revised proposals. What I can deal with are the procedural aspects. I know that there is considerable concern in the area about them.
Under planning legislation, the GLC's revised proposals could be handled in one of two ways. Either the GLC could seek permission from the Secretary of State to submit further proposals for amending the initial development plans or specific proposals could be dealt with as departures from the development plan approved by the Minister in 1969. Under this procedure, any proposal which was regarded by the local planning authority as a substantial departure from the development plan would have to be referred to the Secretary of State, and he could if he wished decide the matter himself after holding a public local inquiry.
I understand that the GLC wishes to deal with its revised proposals as departures from the development plan instead of in the context of a further application to amend the development plan. Bexley and Greenwich Borough Councils, on the other hand, seem to favour a development plan amendment, so that the revised proposals can be dealt with as a whole instead of as the need arises and therefore be the subject of a comprehensive inquiry. It is for the GLC to decide which of those two procedures should be followed.
My Department has told the GLC that we see no objection to the departure procedure being used, provided that every opportunity is given to the borough councils and other interested parties to object to the proposed development. The need for consultations between the GLC and the two borough councils has also been stressed.
I can see the validity of the borough councils' argument that the revised proposals should be dealt with as a whole. I think I must make the point, however, that an old-style development plan amendment is a very lengthy and cumbersome process which we are seeking to replace by the speedier, more flexible processes incorporated in the new structure plan and local plan system. We are particularly anxious that local planning authorities should not use their resources in preparing further old-style development plan amendments when they should be looking forward and thinking in terms of the new development plan system. In London, the Greater London Development Plan is under consideration


by the Secretary of State. When it has been decided, the boroughs will be preparing their local plans. We are therefore concerned that further old-style development plan amendments should not be introduced at this late stage if it can possibly be avoided.
If the GLC decides to use the departure procedure, any substantial proposal would have to be advertised, objections invited and referred to the Secretary of State. If the proposal were the subject of strong opposition by the borough councils or others, it would almost certainly be
decided by the Secretary of State after a public local inquiry. The use of this procedure would not, therefore, deprive the boroughs of the opportunity to object and they would, if the Secretary of State thought fit, be able to pursue their objections at a public inquiry.
The departure procedure also has merit—and this is important in view of what the hon. Gentleman said—in that decisions can usually be taken much more quickly than would be possible with an old-style development plan amendment and they could achieve a degree of flexibility which would not be possible with a formal amendment. As I understand that the hon. Gentleman is concerned about the speed of the project, that point is important.

Mr. Mayhew: Before leaving that, will the Minister say which of the departures in the reappraisal are substantial departures and therefore need the Minister's consent?

Mr. Speed: I cannot give a specific answer. We have had no proposals at all. The sort of things the hon. Gentleman mentioned when considering the amendments of the initial development plan—major proposals for housing and open spaces—would, I expect, be substantial departures that I would not wish at this stage to prejudge, otherwise I might be commenting on the merits. The hon. Gentleman can take it that most of the major matters to which he referred and which are causing local concern would fall within this system.
The employment situation is fundamentally a matter for my right hon. Friend the Secretary of State for Trade and Industry. The hon. Gentleman said that because of the regulations many

people did not submit IDCs. He admitted that for Woolwich there had been no refusals in the period from July, 1970 to June, 1972 and that in Erith there had been only one refusal in the same period. There have been a substantial number of approvals which have led to the creation of additional employment opportunities. There is the difficulty—and it has been recognised by successive Governments—that the first priority must go to the assisted areas. If regional policy means anything at all, that policy must be upheld.
There is the question of the next priority down the line with the new and expanded towns. The hon. Member argued that Thamesmead should be treated in this category. So far, as he knows, successive Governments have not found it possible to treat Thamesmead in this category, and certainly I cannot to night give him any assurance from my right hon. Friend the Secretary of State for Trade and Industry that the policy will be reviewed. I will draw the attention of my right hon. Friend to the remarks made by the hon. Gentleman, but I must make it clear that in the present situation—considering the severe regional problems and what has happened regarding the Industry Bill and other Measures now going through the House—it would be unrealistic to expect any early change in the position.
The industrial development certificate picture shows that there have been a substantial number of approvals and very few refusals. No doubt that will be borne in mind, particularly by London-based firms wishing to expand in the area, and those the Department of Trade and Industry would wish to encourage.
I cannot comment on the merits of the matter—I am sure that the hon. Gentleman understands why—but I re-emphasise that if the Greater London Council decides—and it is a matter for that council—to use departure procedures for implementing its revised proposals for Thamesmead, pending a decision on the Greater London Development Plan and the introduction of new-style local plans, I see no reason for dissuading it. I hope, however, that the GLC will take every opportunity of fully consulting the Bexley and Greenwich Borough Councils before formalising any proposals arising from


the re-appraisal of Thamesmead. I am sure that it will do this, and that at the end of the day—depending on what objections are received not only from local authorities but from other interested parties—the other problems I have outlined in which my right hon. Friend the Secretary of State may be involved can be resolved after appropriate public inquiries.
I hope that that reassurance will help the hon. Member and his constituents to see that no final decision has yet been taken and that the procedures exist so that these matters can be investigated and the final decision can rest with my right hon. Friend.

Question put and agreed to.

Adjourned accordingly at two minutes past Three o'clock a.m.